November 10, 2020
Dear Valued Investor:
A record number of people voted in the 2020 US presidential election, and several media outlets have projected that former Vice President Joe Biden has won enough electoral college votes to be declared President-elect. President Donald Trump has not yet conceded the race and is pursuing legal options in several states challenging the outcome. States now have until December 8 to resolve any election disputes, including recounts and court proceedings, as electors officially cast their votes on December 14.
As the process continues to play itself out, we believe the next president will inherit an economy that is improving nicely. Based on gross domestic product, the US economy grew by a record 33% annualized in the third quarter as the economy reopened (Bureau of Economic Analysis), likely bringing the US recession—one of the shortest ever—to an end.
The strength of the US consumer has been a key driver of this recovery, with retail sales already eclipsing their pre-pandemic highs. But it’s not just the consumer driving the rebound. Manufacturing activity has been on the upswing; investment in technology equipment has surged; most housing markets across the country are booming; company results during third quarter earnings season have been much better than expected; and S&P 500 Index earnings are expected to increase significantly in 2021—potentially by more than 20% (FactSet).
Meanwhile, COVID-19 remains a threat as cases and hospitalizations continue to rise. Although the numbers may go higher in the short run, cases are skewing younger and treatments have improved significantly, greatly improving patient outcomes. While widespread shutdowns are unlikely, renewed restrictions in Europe in response to its latest outbreak provide a reminder that this battle is not yet over. We remain optimistic that safe and effective vaccines may be identified within the next month or two and become widely available sometime in mid- to late-2021.
Turning to policy, negotiating a stimulus package to help fortify the economic bridge to a COVID-19 vaccine likely will be among the first priorities after Inauguration Day, though a smaller package in the lame duck session of Congress may be possible.
While political change may cause market volatility, US political and economic systems are resilient and can, after a period of adjustment, adapt to new realities. Most of our investment horizons extend far beyond this election and any political cycle. Our focus remains on providing independent investment advice and helping you stick to your long-term investment strategies. Our commitment to you will not change, regardless of who is in office.
Please contact us if you have any questions.
Craig & Kim
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of November 9, 2020.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet.
This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.