Economic Outlook, Market Update

Near Term Election Uncertainty, but Continue to Focus on Long-Term

October 27, 2020

At the risk of sounding somewhat cliché, one of the most important election days in our country’s history is quickly approaching. While still a week away to the election, approximately 66.8 million votes have already been cast through the mail and early in-person voting, representing 48% of the total votes counted in the 2016 election1.

Along with an increase in voting interest, is an increase in the level of anxiety related to the potential outcome and its impact on our daily lives, finances and investments. The chasm between the major political parties’ platforms and policies seems as wide as ever; and the potential of a contested, drawn-out election is real. But history suggests that the long-term impact to the economy and financial markets based on the political party in control of the White House or Congress is somewhat muted. Surely, some segments of our economy benefit more than others based on political policies (and we will likely have more to say about this post-election), but in aggregate, over the long-term the U.S. economy and stock prices have followed an upward trajectory.

With this in mind, we would like to offer a few thoughts:

  1. In the event of a contested and/or drawn-out election result, there is the risk of a short-term spike in financial market volatility. However, we would expect such a scenario to be resolved in a reasonable amount of time.
  2. Regardless of which party controls the White House and Congress, we expect the economy to continue its recovery from the COVID pandemic.
    • In general, Trump/Republicans will favor perceived pro-growth policies, such as lower taxes and reduced regulation offset somewhat by the impact of foreign trade negotiations.
    • In general, Biden/Democrats will favor perceived pro-growth policies, such as fiscal spending offset somewhat by corporate and personal tax increases.
  3. While the election is very important, management and resolution of the current COVID pandemic will likely have the biggest impact on our economy, and ultimately the financial markets, through at least 2021. The development of effective COVID therapeutics and vaccines is crucial.
  4. We continue to suggest clients evaluate their near-term liquidity needs but stay focused on their long-term investment goals and objectives and limit the temptation to make any major asset allocation changes based on near-term events.

The combination of the COVID pandemic and a polarized political environment can be unsettling and presents many challenges, including the management of investments. Washington Trust encourages you to reach out to your investment team if you have any questions or concerns.

Source: United States Elections Project (https://electproject.github.io/Early-Vote-2020G/index.html) – October 27, 2020

Any views or opinions expressed are those of Washington Trust Wealth Management. The information provided does not constitute legal, tax, or investment advice and it should not be relied on as such. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. Please consult with a financial counselor, attorney, or tax professional regarding your specific investment, legal, or tax situation. It should not be considered a solicitation to buy or an offer to provide investment advisory or other services. All information is current as of the date of this material and may change at any time without prior notice.  The information provided is solely for informational purposes and has been obtained from sources believed to be reliable but its accuracy is not guaranteed.