The markets today, Monday, viewed several hours before the 9:30 a.m. EST opening in North America, appear set to start in positive territory, buoyed by the win of former Vice President and challenger Joe Biden.
Most major North American indicators are in the green at time of writing, The European markets are open at time of writing and most major indicators there are also in the green, although the CAC 40, which contains European blue-chip companies such as Sanofi S. A. Pernod Ricard S.A. and L’Oréal S. A. moved from red to green during the early hours.
The markets this week could provide a textbook case of volatility.
It is too soon to be certain about the net impact of the Biden election victory – or the extent of ‘the Biden surge’. Since the so-called Blue Wave didn’t occur, and since it is unclear whether the Republican Party will retain control of the Senate, (pending run-off races In January) tax hikes on corporations and individuals will not be as high as might have been the case had the Wave transpired.
Continued Republican control of the Senate would remove the likelihood of major antitrust legislation aimed at the tech companies, according to Dan Ives, Managing Director of Equity Research at Wedbush Securities in New York.
The Department of Justice suits against Google and possibly others remain a long-term threat with the potential of years of litigation.
That being the case, the Washington vs. Big Tech strain appears less onerous than would have been the case if the Blue Wave had materialized. That in turn at least reduces one threat to tech valuations, Ives explains.
It is also too soon to be absolutely certain about how the COVID 19 crisis will finally play out and which legislation will make it through the mill in a gridlocked Congress. It is reasonable – and urgent -- to expect a stimulus package that might be more of a compromise than was conceived before the election.
Former U. S. Treasury Secretary Larry Summers highlighted the urgency in a recent BNN Bloomberg interview, suggesting that the economic risks from the crisis would be exacerbated in the absence of a stimulus package within six weeks. “Not having fiscal stimulus is like plunging into a crowd without a mask in the era of COVID: It might work out okay, but it’s taking an extremely imprudent risk,” he said.
And It is also too soon to grasp the net effect of President Donald Trump’s legal strategies designed to overturn some state results.
His allies and advisers privately admitted that his chances of overturning the election results and staying in the White House were slim, according to a Reuters report.
There are other market questions at work including whether cloud revenues will continue driving tech valuations, and the net impact of the crisis on the retail sector. On that score, investors will be waiting for McDonald’s third quarter results today and will also want some clues about the expected impact of virus spikes in the U. S. and lockdowns in Europe.
It is also too soon to be sure about old-time rules such as the amount of cash and near-cash that an investor should keep in a portfolio. In the current environment it may be appropriate to re-visit and revise that weighting in the overall portfolio construction.
However, all of these issues underline the importance of the advisor’s role as financial counsellor. There are many unknowns, compounded for many individuals by forced retirements due to pandemic-related staff reductions and this is a great time for an extra discussion with an advisor.
Disclosure: While I periodically highlight the role of the financial advisor and their contribution to an individual’s financial health in these columns, I am not now and have never been a licensed financial advisor looking to recruit new clients. As a journalist I have interviewed upwards of 300 licensed advisors in several countries over the years and believe that I understand what they bring to their clients.