Another “November Surprise”?

Have you noticed how the stock market has been on a rollercoaster lately?

It’s the election, my friend!

Polls have tightened in key battleground states … and that’s contributed to a wave of uncertainty.

Especially when you consider Sec. Hillary Clinton had even larger leads in those same key states in 2016.

Image
Source: Patch.com

Plus, BOTH SIDES say Nov. 3, 2020 will go down in history as the most important election of our lifetime … which only serves to ramp up market volatility to a fever pitch.

In fact, the 2020 vote is shaping up to be both disputed AND historic.

Today, I want to highlight the very real possibility of a contested election.

While Vice President Joe Biden has a lead over President Donald Trump in almost all polls — both nationally and in battleground states — the polls themselves may be flawed.

Consider that …

•  Many polls look at “all adults” or “registered voters” rather than “likely voters” … which are more difficult (and expensive) to identify.

•  Polls may oversample the college-educated, who lean Democrat.

•  Polls can oversample middle and upper-income urban and suburban zip codes. Many Trump supporters live in lower-income rural districts.

•  Polls don’t capture “shy” voters afraid to publicly voice support for Trump because they fear retaliation.

•  Polls don’t recognize “detached” voters who are registering for the first time … and plan to vote Republican.

•  Turnout models underestimate the “enthusiasm gap.” Many simply despise Trump and don’t feel strongly about Biden one way or the other. Even filmmaker Michael Moore — one of the rare liberal voices who predicted the outcome in 2016 — posted on Facebook, “The enthusiasm level for the 60 million in Trump’s base is OFF THE CHARTS! For Joe, not so much.”

During a recent appearance on The Hill TV, he warned …

The Trump vote is always being undercounted. Pollsters — when they actually call the Trump voter, the Trump voter is very suspicious of the ‘Deep State’ calling them and asking them who they’re voting for …

… whatever they’re saying the Biden lead is, cut it in half, right now, in your head. Cut it in half, and now you’re within the four-point margin of error. That’s how close this is! That’s how desperately close this is!

About 60% of Americans already expect the election will be contested in one way or another.

Hillary Clinton — anticipating issues — says Biden shouldn’t concede “under any circumstances.”

And both campaigns are amassing unprecedented armies of lawyers for legal battles over possible fraud involving a portion of the historic volume of mail-in ballots.

Contested elections are nothing new …

Elections were decided in the House in 1800 and 1824. States sent multiple electors in 1876. A court decision was crucial in 2000. And presidents were elected while losing the popular vote five times.

What is remarkable about 2020 is that we could experience ALL of these in a single election.

Regarding your investments …

We could see stocks fall sharply once the election is over … whoever ends up the victor. Why do I say this?

Well, in the case of a Democrat win, investors may decide to sell stocks to avoid a higher capital gains tax … possibly retroactive to Jan. 1, 2021. That, in addition to a perceived anti-business agenda coming out of Washington.

In the case of a Trump victory, social disorder could erupt to an even greater degree than what we saw last summer. And that could trigger another selloff in stocks similar to what we saw in June … if not worse.

And Nov. 3 could come and go with no clear winner. It could be thrown into Congress, the courts or both.

That being said, I would caution against making any bold predictions.

The 2016 election serves as a good example of how forecasts can go awry … and how quickly the markets can absorb new information.

Four years ago, as more states began reporting — and a Trump victory appeared likely — stock futures sank like a stone with the S&P 500 falling more than 5% in premarket trading. By the time the market closed the day after the election, the index was UP over 1%.

And a Google search of “2016 Trump win and stock market” gives predictions for an instant recession and stocks tanking (all published before election day of course). We all know that’s not what happened.

The lesson is that it’s very unwise to place all your chips on a particular outcome, either in the election itself … or on the market’s reaction. Instead, you want to be liquid … and “hedge” your bets.

The best way to do that is to make sure you have at least 10% of your assets in gold, silver or mining shares … the best hedge of all in these tumultuous times!

All the best,

Sean

P.S. For stocks likely to outperform longer term — whatever the outcome — you’ll want to download our newest offering: The Weiss Ratings Election Report 2020. Get your free report here.

Leave a Reply

Your email address will not be published. Required fields are marked *