Known Unknowns

It’s only fitting that the 2020 presidential election outcome is still undecided. In a year in which so much has already been put on hold, what’s one more delayed decision? As expected, President Trump is likely to lose the popular vote by a notable margin. However, as votes are still being counted in many crucial swing states, neither President Trump nor former Vice President Biden have secured enough Electoral College votes to win the presidency. And it could take weeks to tally all the votes.

Sadly, both Republicans and Democrats have begun trading accusations of foul play — and lawsuits will escalate following all the mudslinging. This type of environment will only further fuel people’s anxieties and frustrations.

In such an unprecedented year, this plot twist is almost expected. In fact, a Gallup Poll found that in the closing days of the presidential campaign, just 21% of Americans expected that the outcome would be known on November 3. Perhaps that partially explains why market volatility has remained muted as investors await an election outcome.

Decisive indecision?

In an election that we’ve called a defining moment for America, Biden and Trump offered voters two very different paths forward. With such stark differences between the candidates on everything from COVID-19 and health care to taxes and foreign trade, most voters made up their minds early. As a result of the pandemic, more than 100 million Americans cast their ballots before November 3. That is more than 71% of all the voters in the 2016 presidential election. 

Ironically, voters sure enough of their decision to vote early contributed to the indecision on election night. That’s because while states like Ohio and Florida could begin counting votes as they came in, other states had to wait until Election Day to begin. And due to the precautions in place because of the pandemic, mail-in votes take even longer to process — and there were a record number this year. Further complicating the counting, while some states require that ballots be received by Election Day, others require that ballots be postmarked by Election Day. For example, the swing state of Pennsylvania, with 20 electoral votes still on the line, will accept postmarked ballots until November 6.

And the winner is…

This isn’t the first time we haven’t had a decision on Election Day. Most recently, in 2000, it took 36 days before we knew that George W. Bush had defeated Al Gore.

To some extent, the uncertainty reflected in the pre-election Gallup Poll has been priced into the market. However, a prolonged delay or contested result could spark periods of volatility. Despite all the unknowns that surround this delayed election outcome, the backdrop for risk assets remains attractive. Historically, risk assets have performed well over most time periods, regardless of which party controls the White House and Congress. We continue to encourage investors to ignore the election outcome noise. Instead, they should focus on a long-term investment horizon with a disciplined investment approach and embrace the benefits of diversification. Often, increased market volatility provides investors with an opportunity to purchase attractive investments at lower prices.

Investors concerned about increased market volatility may want to consider bolstering portfolios with investments such as long-term Treasuries, gold, and low-volatility and high-quality stocks. Once the election outcome is determined, negative real interest rates, generous monetary and fiscal policies, the remarkable rebound in the economy and corporate earnings, and the anticipated defeat of COVID-19 will likely support the market rally continuing into next year.

Regardless of whether your candidate wins or loses, the dust will soon settle on Election 2020 — and hopefully the pandemic, too — empowering all of us to move forward more confidently into 2021.