2020 has already had more twists and turns than an HBO series and in last week's episode, the president contracted COVID.
Yikes.
I didn't see that coming. Did you? I'm not being flippant about the president's diagnosis — his case is potentially serious and I wish him and the First Lady well in their recovery.
Let's talk about what could happen next.
A lot of things could happen, depending on how widespread the White House outbreak is and how severe the president's illness becomes. As I write this, it doesn't look like the president has become unable to perform his duties. (Fortunately, there are legal mechanisms to pass executive power to the Vice President if the president becomes incapacitated.)
Though no president has ever contracted COVID-19, America has had multiple ill or incapacitated presidents. There's a roadmap. However, the situation injects uncertainty into the election, Supreme Court confirmation, and the new stimulus bill. Not to mention, folks were already worried that the election might not be decided on November 3. A high number of mail-in ballots means the drama could realistically play out for weeks after election day.
Could President Trump's illness postpone the election?
That seems unlikely. Technically, Congress could decide to delay the election, but I doubt they'd be able to make it happen before November 3.(1)
Will there be anarchy in the streets if there's no clear winner on election day?
I don't believe so. We have legal and democratic means to resolve a contested election. If no candidate receives the majority of electoral votes (270 or more), the election moves into overtime and a “contingent election” is held by the House.
Two presidential races (in 1800 and 1824) were decided by the House. In 1876, a bipartisan commission reviewed ballots in three too-close-to-call states and awarded enough electoral votes to give Rutherford B. Hayes the win.(2)
In 2000, the Bush/Gore election went to the Supreme Court, which ended a Florida recount and gave George W. Bush the presidency.(3)
Will markets react to new election uncertainty with volatility?
That's pretty likely, especially if the president's illness doesn't resolve quickly. You already know that markets hate uncertainty and traders are revising, hedging, and re-hedging their bets as they digest this evolving situation.
For one historical example, here’s how markets performed during the 2000 election recount drama. In a word, volatility. In all fairness, markets were already reeling from the tech bubble bursting earlier that year. I remember those days well!
Let's keep in mind that markets have already been volatile with a stalling economic recovery, election season, and a continuing pandemic that will drag into 2021.
I think that business and economic fundamentals are currently driving markets, not election-related fears, given that we are closer to making new highs vs. new lows. We'll see if that changes as the month progresses. Remember, your investment portfolio is designed to be durable and withstand market "storms."
While I do believe the presidential election is important for the overall direction of the country, let's not forget the smaller, local races. National races get the headlines, but local officials often have a greater impact on our day-to-day. Suffice to say, please vote!
Please pay attention to the headlines you read and the news you consume in the coming weeks.
Be especially cautious about media that makes you feel anxious, angry, or afraid. Election cycles always bring heightened emotions and more negative news than usual. Take a deep breath and step back if you need to. Call a friend. Call me!
Warmly,
Edwin K. Retter CMT
Chartered Market Technician®
P.S. Need some extra help keeping your cool in these times? A shout-out to my friends and clients in Alaska: Watch these Alaskan brown bears fish for salmon.