Eagle, CO
Investors,
Here we are. Post-election and as suspected we still don’t have the final results – results which are sure to be contested even once they come.
Yet the market is racing higher anyway – even in the face of unprecedented uncertainty.
I am not personally surprised that the race is this close, but I know many of you are. The only thing I am a little surprised by is the market reaction to the closeness. At this point I think the market collectively, like most of us individually, just wants it to be over.
The biggest factor in the upside we have seen so far this week is that pretty much nobody was buying for the past several weeks.
In September, the S&P 500 (SPX) was down 3.92% before dropping another 2.77% in October. The market has been on sale for 2 months.
So, money managers have been watching the sale get better and better and even though unemployment rates are embarrassingly high, money continues to roll into 401ks, and that money must eventually be invested. If passive managers were investing just a little less than normal over the past couple months (which I suspect is the case) they will need to play a little “catch up” now. Perhaps that has started even before the election results are known.
Depending on where you get your news, and how objectively you consume that news – you may think that Trump will eventually win 4 more years in the White House, or, you may believe that Biden has already secured his victory. Setting your personal feeling aside for a moment, the market has rallied at every opportunity since election night.
With each bit of news that comes in, regardless of who it shows is leading, the market just goes higher. If you remember, I said in my note on August 5th:
“The market hates uncertainty more than it hates bad news.
The market can handle bad news. Yes, it goes down, but it comes back too. Just look at the bad economic news we have seen recently… More people have lost their jobs in the past few months than ever in the history of the America. How is the market reacting to that bad news?
So, if you happen to see Mr. Biden’s potential election as bad news, perhaps you should rejoice and look forward to that news being final. The market doesn’t care who sits in The White House any more than I do, personally. We (myself and the market) just want to get it over with so we can move on to focusing on matters which are actually relevant to the economy. Once the outcome is certain, I believe the most likely scenario is for the market to rise on average.
Some clients want to know what we will do if Biden wins.
Answer: The same thing as always. Follow stops and allocate cash to our best ideas and opportunities that are sure to develop.”
It’s the same every 4 years. Folks place too much emphasis on one, known event.
News flash: the market is absolutely terrible at pricing known risk. It is the unknown risk which is more important.
So, at Elevate, we take our cues from price, not from politicians or newscasters. We let the market tell us when things have changed, we don’t try to predict when regimes will change - which is basically just guessing anyway.
I don’t know today who will win this election, but I am convinced that America will lose regardless of the outcome.
Its shocking to me how few people wanted to vote for either Donald Trump or Joe Biden, but so many did anyway. Perhaps all elections are this way, but this one in particular feels like more than half of the people I know who voted, were voting against something, and not for anything.
It’s a shame to me that there are 300 Million people in this country, and these two are the best we can do. That said, I don’t want the job – and frankly, anyone who does, probably should not be allowed to have it.
But there was another candidate on the ballot in all 50 states – Jo Jorgensen, the libertarian candidate. At least 1.58 million people decided they didn’t want to play this 2-party game, anymore. I was one of them, and I applaud the rest of them (thank you!) for voting for the future of our children, instead of against something you don’t like for just the next 4 years.
And to the rest of you. I totally understand, but I hope you’ll reconsider the next time around. Especially because, again, it really doesn’t matter all that much who sits in the Oval Office. But I think its very important to have more than two bad choices, for future generations. That can start now.
For a far more entertaining essay on that topic, check out “It Doesn’t Matter Who Wins,” by PJ O”Rourke.
A quick preview:
“America is an enormous ship of state, too big and complicated for any single person to control it...
Our ship of state is an old-fashioned square-rigged treasure galleon, but with a crew of 16 million. That's the number of people employed by America's federal, state, and local governments. This makes for a vessel almost three times the size of Norway (population 5,435,400).
Of course, in theory, there's a captain – the president. But that's just one of the helmsmen. There are also 435 congressmen, 100 senators, and nine Supreme Court justices with their hands on the wheel.”
PJ is a far better and more entertaining writer than I will ever be!
With so much uncertainty around the election results from here, I am not sure it’s productive to say much else about it.
Over the past 2 months, our strategies have meaningfully outperformed the SPX, which again, is down almost 7% during that period.
We still hold a fair amount of cash, but we have taken opportunities to reduce cash while markets were “on sale” – and in anticipation of a market rally once the election was behind us.
So far, so good.
As I mentioned last month, I am focused on the upcoming holiday shopping season, which is probably already underway. MercadoLibre, (MELI) which I mentioned as specifically one of my best ideas is out with extremely strong earnings results for the quarter, this morning. The stock is up another 7% or so, in pre-market trading.
You don’t need to know anything about finance to know that these numbers are good:
Tonight, we will see what The Trade Desk (TTD) reports.
One last thing before I go. I also mentioned last month that one of the best hedges against inflation is bitcoin. That day, bitcoin closed at $11,374.01. Today it trades for around $14,895… Up 30% in 30 days.
If you don’t own some bitcoin, you should.
ALL of you.*
There are basically no excuses for not having at least a little. If you need help buying some, let me know. I won’t be compensated in any way.
As always, thank you for reading!
Shane Fleury, CFA
Chief Investment Officer
Elevate Capital Advisor
*Bitcoin is extremely volatile and could go to zero in an instant. That said, you can literally buy $1 worth, via Coinbase. So, the appropriate amount of exposure is different for everyone. Typically, we recommend our clients have about as much bitcoin as they would invest in a very aggressive stock with no earnings or trading history.
Legal Information and Disclosures
This commentary expresses the views of the author as of the date indicated and such views are subject to change without notice. Elevate Capital Advisors, LLC (“Elevate”) has no duty or obligation to update the information contained herein. This information is being made available for educational purposes only. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Elevate believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Elevate. Further, wherever there exists the potential for profit there is also the risk of loss.