As we rumble through a very challenging 2020, we are preparing for the next landmine: a Presidential election, which is already swirling with uncertainty. There is nothing worse than an election without a clear winner, both for us, the people, and the stock market.
Remember the 2000 presidential election?
Th election between Al Gore and George W. Bush was very close. As you may recall, Gore appeared to win the popular vote. The election was so close (especially in Florida) that we faced weeks of recounts. Finally, the Supreme Court stepped in. They sided with Bush and declared that he won the electoral college.
The stock market was in total disarray during that period without a clear winner. Markets fell sharply while the final decision held in the balance. Once Bush was declared the winner, markets breathed a sigh of relief and carried on.
The uncertainty seems worse this year
The US is already a hot mess, and as a trader, I’m preparing for even more uncertainty following this year’s election. The US is deeply divided and polarized. The coronavirus is surging in the Midwest. Wildfires are wreaking havoc in the West. The Gulf Coast is bracing for another hurricane. Many schools are operating virtually. The unemployment rate is still very high. Evictions and foreclosures are a looming threat to millions of people. And I didn’t even mention the social justice movement.
Now add in a contentious presidential election, and it sometimes feels like things are going to snap.
Without a clear sense of the election outcome, the markets tend to get nervous. As I’ve written previously, the uncertainty is priced into the markets.
After such a strong comeback from the abyss in late March, traders and investors don’t want to risk profits on an uncertain outcome. When the election is over and a winner is declared, the markets will once again breathe a sigh of relief and get ready to move forward into 2021.
Until then, we are taking a cautious path and playing it lightly. If the 2000 election taught us anything, it’s to expect the unexpected.