Equity markets had another strong quarter led by mega-cap technology stocks, which we increased in our Balanced and Growth portfolios this quarter. The main story continues to be global central banks and government stimulus driving money into markets, most specifically the largest and most liquid companies on the planet, such as Apple, Google, Microsoft, and Amazon. More recently, we seem to be witnessing a tug-of war between “stay-at-home” stocks and “recovery stocks” as the outlook for the virus economy continually changes with daily news, vaccine rumours, and stimulus debates in the US government.

As we steam towards a US election on November 3rd, markets are somewhat choppy. Polling suggests a strong democratic victory, although 2016 served as a lesson that polls are not always reliable. Nonetheless, it is very likely that markets have already priced in a win for the democrats. That said, this is a good time to re-visit the historical impact of elections on US markets. History tells us that election years generally return better market growth than the immediate year following an election. That said, there is a common assumption that Republicans (being pro-business) are better for markets than Democrats. Looking back however, there isn’t much evidence to support that theory. The graph below (which excludes 2020), demonstrates that the partisan characteristics of Presidency determine very little.

With all of this in mind, it is difficult (and largely futile) to make investment decisions based on expected, or actual, election results. In the meanwhile, we continue to hold quality companies, take gains on them when valuations run too far, and are happy to keep cash on hand in search of new opportunities.

-The Gilman Deters Team

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