News & Insights

What to watch for in the upcoming presidential debates

Tonight’s presidential debate marks the beginning of the home stretch into Election Day. Over the past several months we have pointed to the upcoming presidential election as one factor that will impact the markets over the short-term. To further clarify our position on this, it is our belief, which is backed by long-standing historical precedent, that the rhetoric and messaging of the candidates and their respective campaigns can, and likely will, cause market volatility in the coming weeks, but the actual election results should not be a driver of long-term investment decisions. Regardless of which candidate you support, it is critical to understand whichever party controls the White House generally has very little to do with the performance of the equity markets.

Nonetheless, the political theater is intriguing and we anticipate tonight’s debate will serve to highlight the significant difference in styles and points of view of the candidates on a range of issues the country faces, several of which will become a short term focus for markets.

Key Issues to watch for:

Covid-19:

The global pandemic remains top of mind for many as we continue to navigate the cast array of problems brought on by Covid-19. Infection rates are starting to show signs of spiking once again in areas around the country and the risk of a major resurgence this Fall has many people nervous. How will each of the candidates respond? Trump is likely to defend his administration’s response to the pandemic, while Biden will no doubt argue that a dramatically different approach should be taken. We hope to gain confirmation and clarity on both candidate’s stances on what they intend to do going forward in the event of a resurgence and how those strategies might impact economic conditions.

Stimulus:

Evidence of a bifurcated recovery continues to mount. Though financial asset prices have rebounded, the latest employment data suggest that the unemployment picture remains elevated. It remains to be seen if an additional economic stimulus package will pass in Congress prior to the November election. Without additional stimulus, it is likely that the stock market will stall or see additional short-term volatility. A question on investors’ minds is how do President Trump and VP Biden plan to support the recovery efforts and will additional support be provided to cities and states.

Taxation:

With the fiscal deficit expected to be north of $3 trillion in 2020, a frequent question is how we will pay for the government expenditures. It is our belief that taxes will have to increase in the future. It is widely expected that if elected, Biden will increase taxes. We await details on which taxes he is committed to increasing and more clarity on the timing of any increase. The recovery from Covid-19 remains fragile and any tax increases initiated quickly could derail recovery.

Relationship with China:

The relationship between the two largest countries (as measured by GDP) is of significant global importance. A positive or negative relationship has far-reaching ramifications. We believe it is important to hear each candidate’s plan on how they would engage with China. The Trump administration’s past approach created considerable uncertainty and market volatility. There is concern that given another term, his approach could be even more aggressive. We hope to gain additional insight into his plans. On the other hand, there is uncertainty of what a Biden led administration would do to US-China relations. Would he continue to take an aggressive stance or be more inclined to revert to the policies of former administrations?

Infrastructure:

Spending on Infrastructure is one of the few policies that both candidates seem to agree upon, however more details that are specific are needed from both. We would like to hear details and plans on projected spending, allocation of capital, and anticipated financing for projects. A large infrastructure plan could reduce unemployment and revitalize parts of the economy.

Final Thoughts:

We recognize that the period leading up to elections can cause angst for investors and this year is no different. Investors making financial decisions based on their political views should proceed with caution as it is the underlying economy and prospects for growth that drive market returns, and not the person holding office. While candidates may run their campaigns on a sweeping overhaul of current policies, it is more likely that only one or two actually become law. Our focus will be on those policies that could alter the current economic trajectory that lead to additional investment opportunities.

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The Information contained in this document is based on data received from third parties which we believe to be reliable and accurate. YorkBridge Wealth Partners, LLC has not independently verified the information and does not otherwise give any warranty as to the truth, accuracy, or completeness of such third party data, and it should not be relied upon as such. Any opinions expressed herein are our current opinions only.  YorkBridge Wealth Partners, LLC is an SEC Registered Investment Adviser under the Investment Advisers Act of 1940 (“Advisers Act”).  Registration of an investment advisor does not imply any specific level of skill or training. The information contained in this document is to assist with general planning. Please consult with your own tax advisor and attorney for more specific information.