Post-Election Outlook

Post-Election Outlook

Results

  • Barring some unforeseen event, it appears that Joe Biden will become the 46th President of the United States.
  • The Senate is currently 50-48 with Republicans in the lead. There are two races still to be determined in Georgia with a special runoff scheduled for January 5th.  Republicans are currently favored to win those seats.  Were the Democrats to win those seats, Vice President Harris would be the deciding vote along party lines.
  • The House of Representatives is staying Democratic, though with a slimmer majority. Republicans as of this writing have been able to claw back 10 seats.

Fiscal Policy

  • A potential negotiated fiscal package of 1 trillion USD could be passed targeting struggling businesses/households.
  • The Federal Reserve will continue to remain dovish, particularly if fiscal stimulus remains inadequate.
  • With a divided government, the likelihood of corporate and high net worth tax hikes remains unlikely.

Sector Outlook

  • Industrials and Materials are poised to perform well given the potential of a bi-partisan infrastructure bill.
  • Certain subsectors in the Health Care space will have a positive tailwind given further funding provided for the Affordable Care Act.
  • The outlook for Energy under a Biden administration is mixed. The vaccine news from Pfizer could be a spark for a stronger return in 2021 to economic growth, an increase in demand for oil.  Re-regulation and a less confrontational approach towards Iran could create different impacts on the supply side of oil.
  • Technology is under bi-partisan pressure. Parties are split on their approach with Democrats looking into anti-trust legislation and Republicans looking into discriminatory practices towards conservative viewpoints.

International Outlook

  • The focus will be on China. Biden will continue the Trump administration’s approach to China but will look to build a coalition of allies to create fairer trade agreements.  A more predictable policy could reduce market volatility, a mainstay under the Trump administration.
  • Lower volatility will provide increased risk-taking, a lower dollar is a tailwind for international equities.
  • A looser stance on immigration policy will have an incremental increase in immigration, a boost to the labor supply and for long run growth.

Written by:  Antonio Belmonte, CFA, Chief Investment Officer

These are the opinions of Antonio Belmonte and not necessarily those of Cambridge, are for information purposes only, and should not be construed or acted upon as individualized investment advice.  Investing involves risk.  Depending on the types of investments, there may be varying degrees of risk.  Investors should be prepared to bear loss, including total loss of principal.  The strategies discussed herein are not designed based on the individual needs of any one specific client or investor.  In other words, it is not a customized strategy designed on the specific financial circumstances of the client.  However, prior to opening an account, Cambridge will consult with you to determine if your financial objectives are appropriate for investing in the model.  You are also provided the opportunity to place reasonable restrictions on the securities held in your account.