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2020 elections
November 4, 2020

The Pending Election and the Market

Investment Committee

As expected, this presidential race has come down to the wire and is much tighter than pre-election polling suggested. Due to record voter participation, combined with the strength of mail-in voting due to concerns over social crowding at polling sites, the tabulation of all votes will continue through this week. While more likely will be known by the end of today, it may not be until later this week or even next week that all ballots have been counted. As such, we counsel investors to maintain perspective and avoid making portfolio changes in response to short-term events. Investors would do better focusing on their long-term goals – how much they save, spend, and their general asset allocation.

Pre-election polls showed that most Americans were anticipating uncertainty following the election, so the fact that official results won’t be certified immediately increases the odds that the market will not panic. In the months leading up to this election, our JNBA Investment Committee has been repositioning portfolios in an effort to capture higher yields in the face of rising valuations. We have adjusted cash and bonds to take advantage of volatility and are now beginning to deploy it back into stocks as opportunities present themselves. A hallmark of our disciplined review and trading process is to objectively and keenly evaluate the situation before attempting to optimize the risk/return spectrum. It is never easy, but we know from historical experience that it is a worthy endeavor.

In summary, we advise against building an investment approach based on a potential election outcome. At the current moment, it appears that Republicans may be in a strong position to retain the Senate, which would give them a veto over progressive legislative plans proposed under a Democratic presidency. We know from analyzing the data that markets tend to do best under a split government, but in the long run, markets continue to rise regardless of which political party was in control. As the chart above demonstrates, market performance has been much more closely tied to corporate earnings and the regular business cycle than the presidential party in office. We remain committed to keeping you informed in the days and weeks ahead and as always, would encourage you to reach out to your Advisory Team if you have any questions or concerns.

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 blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.

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