After a historic week, it looks like America will head into the new year with a new president and some very encouraging news in the fight against Covid-19. The ways that these events have rippled through the markets are yet another reminder of just how complex – and how resilient – our economy is. In the weeks ahead, it will be very important that folks separate their personal feelings from their financial planning and stay focused on things that they can control.
On today’s show, we discuss how the markets have reacted to the election and the pandemic with an eye towards 2021.
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1. Better-than-expected news on vaccine development.
We knew that progress was being made on both the treatment and prevention of Covid-19. But Pfizer’s announcement that their vaccine has been 90% effective in testing was a welcome surprise. There are still some logistical hurdles to clear, such as manufacturing mass quantities and refrigerating the vaccine for distribution. But Pfizer projects they will have 50 million doses available by the end of the year. And that’s just one candidate. Moderna and Johnson & Johnson also hope to make some announcements about their vaccines before the end of the year.
Now, that doesn’t mean we’ve beaten Covid-19. Infection rates continue to spike across the country. According to experts, it could be Spring 2021 before we’re all making appointments for Covid-19 shots. We need to stay safe and take care of each other to keep the disease in check until then.
2. Markets love divided government.
The combination of Pfizer’s vaccine announcement and Joe Biden’s apparent victory in the presidential election had the markets in a very good mood as we recorded this podcast. Stocks in sectors like travel, entertainment, and energy that have been struggling during the pandemic experienced a significant bounce. Investors have started to glimpse some light at the end of the tunnel and, perhaps, the first signs that we might get back to normal life next year.
As for the election, don’t mistake Wall Street’s reaction for partisan cheerleading. We’ve discussed on previous podcasts that the markets don’t care if the president is a Republican or a Democrat. The markets do, however, respond favorably to divided government. Assuming that Joe Biden is sworn in next January, he will be working with a Democratic House and, depending on the results of the Georgia elections, a closely divided Senate that will probably lean Republican.
We’re hopeful that our leaders will find some common ground on issues like keeping the economy stable and the public healthy. But a divided government isn’t likely to overhaul taxes or health care. What Washington considers gridlock, Wall Street sees as a stable environment that’s good for investors on both sides of the aisle.
3. Don’t “vote” with your wallet.
Between frustrations surrounding the pandemic and the stress of the election, emotions are running high in all directions right now. It’s so important that you don’t use your financial plan to vent some of those feelings.
We talk a lot about taking the long-term financial view on our podcasts. But market movements in the last two weeks actually offer a short-term case study in why that is.
Ahead of the election, the markets were down around 7%. Some folks might have looked at those numbers, worried about how their preferred candidate was doing in the polls, and decided to sell some of their assets. Flash forward to today, and the markets are back UP around 7%. That nervous investor just missed out on a positive 14% swing!
Countless movements like this are going to happen over the course of your financial plan. And in the long run, we believe these ebbs and flows are likely to continue to trend upwards, which can help you grow your nest egg, and help you build towards a comfortable retirement for your family.
If you’re still feeling a little unsettled about the elections, Covid-19, and your plan, schedule a chat with one of my fiduciary advisors. We can work through our checklist for 2021 and make sure that you and your family are ready to make the most of a promising new year.
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Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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