SGH Wealth Management: What I'm Reading

The Aftermath: Post-Election vs The Post-Pandemic Trade (Part 3/3)

SGH Wealth Management’s “Read What I’m Reading” Nov. 2020 | Nov. 13th, 2020

I don’t know about you, but I’m looking forward to being able to write about something other than politics… Although much is still up in the air, it seems that the stock market has received the information it was looking for.

With more election contestation ahead, so far Trump and his allies are 1 for 25 in court, post-election. Republicans are still favored to win both Georgia races for the US Senate and retain their majority, though this Georgia runoff will be something that we watch closely.

In this most probable scenario (Biden/GOP Senate), future stimulus may now be muted but then again, Mitch McConnell may enjoy being the new #1 Republican on the Hill. This may lead to less growth in the stock market over the next 6 months, but we find a focus on stimulus to be shortsighted. The next 2-4 years will re-introduce America to political gridlock on the big issues, which could include keeping taxes as they are until 2025. In the bond market this could potentially be positive news, with falling real yields and inflation.

The other giant force pushing the markets around is the recent optimistic vaccine news. This has caused investors to fire sale their pandemic stocks and over the last month: (As of 11/18/2020)

·         Zoom Video (-30%)

·         Peloton (-22%)

·         Carnival Cruise Lines +25%

·         Delta Airlines +22%

This reaction again feels rushed as there will be permanent changes that come from this crazy 2020 year. In unpacking these events and recent market responses, we expect to see contrarian opportunities to seize and potentially more value for Big Tech stocks.

The Detroit Free Press interviewed Advisor Sam G Huszczo, CFA, CFP the day after the election for our thoughts in the 1st article below: