2020 has provided an endless number of stories for news agencies. It’s no surprise that volatility in equity markets was present throughout global markets in the lead up to the Presidential election. In addition to the approaching election, rising coronavirus cases, vaccine developments, and global government responses were key drivers of market sentiment in the month of October.
*Equity Indices - FTSE Global Indices in CAD, Bonds - Barclays Global Aggregate Canadian Float Adjusted Bond Index based on end-of-day data for the Total Return Index as at market close as at November 3 2020
At the time of this writing, a Presidential winner is still undetermined, but what will matter most in November is how quickly and decisively a winner is declared, and whether a single party will have control of the Senate. The longer the election drags out, the more uncertainty it will create and the more volatility we can expect.
If there is a change in presidents, a Biden presidency would mean proposed large scale policy change from tax reform to foreign policy. If the democrats fail to take the Senate, they’ll struggle to pass bills and appoint judges.
Volatility has typically subsided once the dust from elections settle, but given the ongoing challenges of the pandemic, uncertainty remains a big part of the story. A positive development in the storyline in October is the forward momentum in clinical trials of a vaccine. The availability of a successful vaccine, or even the likelihood of one, should have a significant positive effect on global stability.
Global economies have responded to the economic burden of the pandemic by continuing their expansionary fiscal and monetary policies. These policy tools are positive for stocks and will play an important role in a nations GDP growth as countries recover from the pandemic.
Even with restrictions tightening globally we can see a recovery gaining momentum. As an investor it can be tough to tune out the noise, but by looking past the turbulent news cycle you’ll be able to maintain discipline and achieve your financial goals. Keeping a well-diversified portfolio bolsters your investments against the volatile effects of these macro-economic and political moments. We expect the road forward to be a bumpy one and as always, we expect those who have and stick to a plan will be successful.
Thanks for reading and we hope you stay safe!