November 5, 2020

Post-Election Market Reaction

By Michael McKeown, CFA, CPA - Chief Investment Officer

Post-Election Market Reaction

Since the beginning of the week, the S&P 500 Index, which tracks the largest U.S. companies, gained 8%.  Bond yields fell from a recent high on the ten-year yield from 0.94% to 0.78%.

With the election process still ongoing, many are wondering, "How can the market be up so much?"

It is always difficult to pinpoint "the" reason for short-term market moves.  This is especially true in such a fluid situation.

Here is our take.

First, Republicans likely retaining control of the Senate means that it is unlikely corporate tax rates will rise from 20% to 28% any time soon.  This means higher earnings for companies rather than the potential tax hit that was feared.

Second, under a Republican Senate, personal income tax rates along with capital gains taxes will not be going up.  It was feared that investors would rotate out of technology stocks as they look to take gains in 2020, instead of next year when tax rates may have gone up.  This selling pressure has been averted.

Third, interest rates will continue to stay lower for longer.  This means stocks are relatively more attractive than bonds, so an increase in the stock market's valuation is warranted. A huge fiscal spending bill that may cause an increase in inflation is less likely with a split government.

As of this writing, we still do not know who won enough votes in the Electoral College.  The risk for markets of a contested election process remains.

In addition, there is still vote counting for the Senate, along with the potential for run-off races.  These districts may not know who won the Senate until early January, and thus we may not know which party controls the Senate until then.

We stand ready to rebalance portfolios into undervalued assets should attractive price levels occur.  We also may need to trim positions that continue to move above the portfolio targets.

Important Disclosure Information

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Marcum Wealth, or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Marcum Wealth. Please remember to contact Marcum Wealth, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Marcum Wealth is neither a law Firm, nor a certified public accounting Firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Marcum Wealth's current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request. Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your Marcum account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; ( 2) comparative benchmarks/indices may be more or less volatile than your Marcum accounts; and, (3) a description of each comparative benchmark/index is available upon request.