The U.S. Presidential election is less than a week away, new COVID-19 infections are setting records globally and within the U.S., and France and Germany have entered lockdowns again. Equity markets fell roughly 5% this week with international markets sliding slightly less than U.S. markets. The Dow Jones Industrial Average drop on Monday was the biggest one-day drop since September 3, and the weekly selloff was the worst one-week price move since March of this year.  

Weekly Returns

S&P 500: 3465.4 (-5.63%)

FTSE All-World ex-US (VEU): (-4.85%)

US 10 Year Treasury Yield: 0.87% (+0.03)

Gold: 1877.63 (-3.57%)

EUR/USD: 1.16 (-1.81%)

Major Events

• Monday – Dow falls more than 600 points as average daily coronavirus cases hit a record high
• Monday – British pharmaceutical giant AstraZeneca said its Covid-19 vaccine candidate has produced a similar immune response in older and younger adults
• Tuesday – New orders for key U.S.-made capital goods rose more than expected in September, wrapping up a quarter of potentially record growth in business spending and the overall economy
• Wednesday – Louisiana is hit by Category 2 Hurricane, Zeta, the eleventh named storm to make landfall in the continental U.S.
• Thursday – U.S. GDP rises an annualized 33.1%, beating estimates
• Friday – U.S. stocks fell again, with well-known companies like Twitter, Apple, Facebook, Amazon, Tesla, and Netflix all down more than 5%

Our Take

While many stories may be focused on the U.S. Presidential election that is less than a week away, it is important to be mindful that global spikes in COVID infections, additional lockdowns across Europe, and the potential for the tightening of restrictions in the U.S. will probably have a larger immediate impact on the market than the outcome of the 2020 Presidential election. The policies of the next president will likely have some impact on the economy and markets, but at this point, it is not possible to predict the winner, or which of their policies will make their way into law.

The virus has proven unpredictable throughout the year, but the outlook today is significantly different than what it was in March or April of this year. There are not massive shortages of PPE or ventilators, many layoffs have already occurred, and we have multiple vaccines with promising results in various stages of testing and approval.  

The biggest financial impacts will likely come from the potential for increased restrictions and lockdowns, as well as the expiration of certain unemployment benefits. It will be important to keep an eye on Congress as well as the Fed for any future stimulus or additional easing of monetary policy, which both had beneficial impacts on the market in the short-term.

Speculation is not an investment strategy. We do not believe investors with long-term time horizons should be making allocation adjustments based on speculation on the election or based on the latest virus news of the day. Investors with shorter-term time horizons should not be overly exposed to volatile equities and should not make trading decisions based on speculation of public policy.