As we step into 2021, so many were awaiting the results of the Georgia run-off to finalize what 2021 will look like on the investment front. However, designing a portfolio based on political outcomes is, on some level, a fool’s errand. The beauty of our democracy with all its checks and balances means that extreme changes are harder to enact. While politicians make bold universal promises to get elected, what can be accomplished is often earthlier. I am encouraged by this election as I was in 2016. Here’s why.
First. There is no election conspiracy. Friends of mine on the right point to every election having certain patterns, yet feel the burn of how this one violated the patterns we’ve come to rely upon as laid down by our Constitution. Therefore, something must be amiss. There must be fraud. In actuality, what’s different can be attributed to two factors: COVID-19 and Trump’s presidency. As we know, COVID-19 led to massive mail-in balloting. It was the safest choice for citizens across the nation and expats to adopt to have their vote count. The approach resulted in the greatest number of votes ever being cast. But that alone didn’t tilt the outcome democratic. The result is the consequential sum, the defining reaction to Trump’s derisive and deflective nature that has underpinned every action he’s taken in office. By proclaiming fraud, challenging every state in which he lost, Trump created and furthered a sense of distortion. The American people were not afforded the traditional pattern of voting, a President conceding an election and transitioning his position of power with grace to the President-Elect. This week’s unfolding mayhem, incited by Trump’s own ongoing rhetoric, leaves me consoling the right in 2020 as I did the left in 2016. Then as now the advice is, “Don’t bite off your nose to spite your face.” The elections are over, Trump has been muzzled and censored. Maybe now we can figure out how to truly listen to one another and work together. There is much work to be done.
Second. Given Trump’s polarizing and reactionary presidency, I find it comforting to know that the electorate sought more of a middle ground. The result is not a total repudiation of the economic policy of the last 4 years. If it was, the pendulum would have swung further. This election was lost by a man who has put himself above all others. That he is adopted by people who see God as being first and service the way of the Lord has baffled me. I am impressed that moderates tried to balance his loss by placing more republicans in the house and holding the Republican majority in the senate. The Georgia run off was an opportunity for Trump to lead the Republican Party and graciously usher in a new administration with a split congress. Instead, he alone is responsible for bringing out the vote from the left and pushing enough moderates to vote democrat to snatch defeat from the jaws of victory. There is much work to be done. Let US figure out how to do it together.
Third. The first women vice president has been given a very unique platform. Only three times before in this nation’s history was the Senate spilt 50/50 – 1881, 1953 and briefly in 2001. John Adams had this to say about the vice presidency: “My country has in its wisdom contrived for me the most insignificant office that ever the invention of man contrived or his imagination conceived.” I think Kamala Harris will find it far more significant. But it will be hard. Every senator will matter. The American people are tired of polarizing politics. They want common sense and centrist ideas to be led with civility. That is our take and we are investing based on it.
Here’s what that means. Certain industries will have a friendly tail wind, others will be sailing a reach, and others still may face a bit of wind in the face. We may actually get some kind of coherent plan for healthcare. Transparency may allow executives to plan rather than react. Whether anything can get through congress is beside the point. Green energy could have already put up the spinnaker and legalization of marijuana may take another step forward. More stimulus is probably on the way and the leadership around COVID will take its cues from what has worked in other places like New Zealand and Australia. That should be good for growth, But lockdown and the prospect of greater interest in curbing monopolies could temper some enthusiasm. We expect that diversification will work, corrections may happen, sectors could rotate and a wall of new worries will give wall street more footholds to climb. The pandemic is still the most powerful force in the room and is a slow-moving natural disaster being met with equally powerful monetary weapons. At some point the pandemic will end, the money printing will stop, and a successful economic recovery will be met with a Wall Street sell off. But that too shall pass.
Protect, Manage and Pursue are the three motivations that drive investing. If you had an amazing year in 2020, it might make sense to trim a little profit and reallocate. That management technique may be hard to do if your focus is on making more. If you are still on the sideline, you might do well to start nibbling at the things that are starting to show signs of life. For most of us, it’s more important to “live life with the money we have” rather than “live for the money with the life you have left.”
Find your purpose and go fulfill it and four years from now we will all be better off. “If you can’t find someone to fly with give me a call, I’ll be your wingman.”
Tom Shepard, CEO/Founder