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The Election is Over, Uncertainty Remains

Updated: Aug 20, 2021

Pre-Election Polls

FiveThirtyEight, sometimes rendered as 538—predicts a 90% chance Biden will win. It predicted a 71% chance Hilary would win in 2016. Many polling establishments say they have adjusted for 2016.

The Democracy Institute and Trafalgar predicted the 2016 Election correctly. Was this luck or skill? The Democracy Institute has the following predictions:

  • National Popular Vote: Trump (Republican) = 48% | Biden (Democrat) = 47%

  • Electoral College Vote Projection Trump = 326 | Biden = 212

  • Trump picks-up Minnesota, New Hampshire, and Nevada

Below is a summary of the Trafalgar Group predictions.

However, Morgan Stanley suggests the election result predictions could be uncertain due to:

  • Getting a clear sense of who is winning will be difficult, given the large amount of early voting by mail and absentee ballots and different rules around processing ballots, which we discuss below.

  • President: If Trump appears to have lost Florida, markets may quickly conclude he has probably lost the presidency.

  • Senate: If the North Carolina race is won by Cal Cunningham (the Democratic candidate), then Morgan Stanley believes there will be an indicator to markets that Democrats have taken control of the Senate. Democrats have also won seats in other close races, such as Colorado and Arizona, where polls close later in the night.

  • Key Demographics: Keep an eye on results coming out of suburban areas such as Maricopa County in Arizona and Peach County in Georgia, as well as older leaning regions such as Sumter County and Pinellas County in Florida. Results in these regions could prove to be a canary in the coalmine.

J.P. Morgan asks, “What if Trump Wins?” Well, the Financial and Industrials were the best assets in 2016. However, if money supply does not improve due to fiscal stimulus, we would likely sell into such strength. And if Biden would win, we would maintain our current portfolio, since technology will likely continue to do well.


New U.S. daily COVID cases begin to rise, but we see a drop in the 14-week growth rate. The hotspots remain in the Northern Mid-West and other colder regions. Daily death rates remain low relative to the case growth, but there were several days in the past week at or around 1,000 daily deaths.

The EuroZone continues to outpace the U.S. in daily new cases and deaths:

  • The EU has over 200,000 COVID cases per day.

  • Their daily deaths are near 1,600 per day.

Sweden continues to drop giving support for a low “herd immunity.” They are at two deaths per day.

Shutdown or No Shutdown?

As long as the medical system is not a burden, meaning deaths remain low relative to new cases, we should not shut down. The World Health Organization (WHO) is officially urging world leaders to stop using lockdowns as primary virus control method. This is not a reversal by the WHO, but is a change based on the current situation.

With the idea of work from home/work from anywhere, we are seeing a massive movement of people away from cities. People are moving due to fear of others or restrictions by the Government, but most likely both. Also, working from home will limit the ability of states and cities from raising taxes to close their budget deficits. Eventually, it will likely include nations as well, since you only need an Internet connection to work remotely.

Thousands of citizens in Paris were stuck in a gridlock on the highway trying to escape ahead of the France lockdown.

The vast migration of over 14 million Americans is coming due to a rise in remote work, studies show. Companies of all sizes are adopting a remote work policy, and this widening the talent pool for SMBs.

The Economy

Real gross domestic product (GDP) increased an annual rate of 33.1% in the 3rd quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. But this is just an indication of some of the economy starting up again as lockdowns ease. In the 2nd quarter, real GDP decreased 31.4%.

Paul Krugman has the right take on the number, as follows:

  1. Everyone knew it would be a big number.

  2. It’s telling us about the rapid, but partial snapback of late spring/early summer; growth has slowed a lot since then.

  3. We’re still far from full recovery.

  4. Nobody cares.

Personal Compensation Expenditures soar. It appears the hardest hit sectors have finally bottomed. From a decline in prices in Quarter 2, we are not seeing a very strong spike upward in prices. The BEA reported that its third-quarter price index rose by 3.4% on an annualized basis, after having fallen by 1.4% in the second quarter. The Fed is going to consider this spike simply catch-up, but prices don’t need to “catch-up” after a lockdown.

Movement: New Data Reveals just how many Americans Temporarily Moved to Escape the Pandemic.

The Market

U.S. Weekly Recap: Dow (6.47%), S&P 500 (5.64%), Nasdaq (5.51%), Russell 2000 (6.22%). U.S. equities sold off sharply this week. The S&P suffered its biggest weekly pullback since the depths of the coronavirus crisis in late March. The selloff was largely blamed on worsening coronavirus trends in the United States and Europe, with the latter imposing new lockdown measures. Election uncertainty, the fiscal stimulus stalemate, and a high bar for big tech earnings were also cited as overhangs. This is why it’s dangerous to pay attention to the media; the reason the market is choppy is because of the money supply.

U.S. monthly (October 2020) Recap: Dow (4.61%), S&P (2.77%), Nasdaq (2.29%), Russell 2000 +2.04%. U.S. equities were mostly lower in October, with the S&P 500 logging its second straight monthly decline and ending nearly 9% below its all-time high on September 2nd. A resurgent coronavirus pandemic in Europe and America made for a downbeat backdrop as the market's hopes for pre-election fiscal stimulus were dashed. Treasuries were weaker with the curve steepening. The dollar was better against the euro, but weaker on the yen cross. Gold finished the month down 0.8%, its third consecutive monthly decline. Oil gave up a lot of ground, with WTI dropping 11.0% in October amid concerns about increasing supplies and rising demand COVID-related threats. This brings up a similar question as presented above. If these risks were the reason for the sell off, why is the curve steeping? Investors should be piling into long term bonds. 

Value rotation happened earlier this year, but we saw this as an inevitable reversion to the mean and did not chase it. Let’s be patient and see what our signals tell us to do. 

Money Supply

The latest numbers show M2NSA 13-week annualized money growth falling to 10.9% from 11.5% last week —way off the peak money growth of early July, when growth hit 62.7%. In normal times, 10.9% growth would be very strong, but this kind of growth cannot sustain a stock market rally that was fueled by 62.7% peak growth. At the same time, 10.9% growth does add to the upward pressure on prices. The stagflation scenario continues to be developing. Early 2021 could see continued acceleration in prices with a stagnant economy.

For real-time updates, be sure to tune in Tuesday – Thursday on Facebook and YouTube live for our “Daily 3x3” livestreams and Wednesday “Market Updates.” Follow GWS on Facebook and YouTube so you never miss a broadcast!


If you have any questions, please contact your Lead Advisor or any other member of our team. We are here for you.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

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