Over recent days, markets have been rattled by a rise in Covid-19 cases, and the uncertainty surrounding next Tuesday’s election has many investors worried. Depending on the election outcome, we could see considerable volatility due to potential shifts in fiscal policy. In these very difficult and uncertain times, I encourage investors to maintain long-term perspective.
Often during this eventful year, I have been reminded of how innovative humankind can be in the face of challenges. Yesterday, U.S. GDP data was released: For the third quarter, the U.S. economy demonstrated its resilience by growing 7.4%, which represents an annualized rate of 33.1%. Companies and countries around the world are adapting to new norms. Vaccine development is proceeding at a pace never before seen in history. We owe a debt of gratitude to all involved in these efforts as well as to those who have been on the frontlines of the pandemic.
From an investment standpoint, we are in a market that favors bottom-up security selection, guided by rigorous fundamental research and an understanding of the thematic forces shaping the world. While the economic rebound we’ve seen so far is encouraging, many companies—both large and small—continue to struggle through a solvency stage that could be quite lengthy. Although consumers overall are holding up well and have healthy balance sheets, many households are still under a great deal of pressure.
Fiscal policy is a key driver of economic conditions and the specific opportunities in the market. We are prepared for fiscal policy uncertainty to result in volatility, market rotation and leadership shifts in the wake of the election. Regardless of the election’s outcome, it is my fervent hope that we see solution-focused dialogue that results in appropriate fiscal policy and regulation levels for the months and years to come.
For investors, my advice is:
With more volatility on the horizon, investors are likely to have many questions about their asset allocations over these coming weeks. Please check back to our website often for new resources and thought leadership about the markets and how we are pursuing opportunities through risk-aware strategies.
Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be appropriate for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to the potential for greater economic and political instability.
Asset allocation and diversification do not guarantee a profit or protect against a loss.
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