Presidio Wealth Management Market Commentary 09/29/2020

S. Parker Christiansen, PPC™

September 29, 2020

We are in the final days of the third quarter and I am pleased to report that Wall Street is in a more positive mood. September certainly lived up to its reputation as being one of the weakest months of the year. Last Friday, the stock market bounced back strongly from a four week slide which is the longest such streak in more than a year. We are adding to the gains today to cut the September losses close to 6%.

Despite the recent market pullback the U.S. Economy continues to make a strong V-shaped recovery. The Federal Reserve Bank of Atlanta is forecasting third-quarter GDP growth of 32%.

Past Performance is not a guarantee of future results.

That estimate isn't surprising given the rebound that we've seen in several recent economic data reports, including retail sales, durable goods orders and ISM manufacturing data have all been strong.

October kicks off a period of seasonal strength, it has been a strong month for the stock market for more than 30 years and the 4th quarter of the year is historically the best quarter of the year. Markets are usually bolstered in the last three months of the year, (including election years) as we enter into the holiday season and consumers spend more on Halloween, Thanksgiving and the Christmas holiday which boosts economic activity.

The chart below from Bespoke shows the average historical investment performance of the S&P 500 for prior years for the upcoming week, month and 3 months period.

Bespoke: Seasonality Tool

Past Performance is not a guarantee of future results.

October is also leading up to the November 3rd presidential election. The presidential debates will be in full swing starting with the first debate tomorrow as both candidates will "suck up" to voters and attempt to sway them their way.

I believe the biggest near-term risk we have to the upcoming election isn't whether Trump or Biden wins but whether the result is contested. Personally, I'm hoping for a decisive presidential election, so that the results are clear. A contested election result would certainly create a lot of uncertainty in the investment markets and a possible upheaval in society and nobody wants that to happen.

Observations from prior election years:

There have been 23 elections since the S&P 500 Index began in 1957.

19 of the 23 years (83%) the market was positive.
When a Republican was in office and a Republican was elected (or reelected), the total return for the year averaged 11.9%
When a Republican was in office and a democrat was elected, the total return for the year averaged -2.6%.

Source: First Trust

Past Performance is not a guarantee of future results.

While elections drive heated emotions, all historical data shows that making portfolio modifications based upon the current political winds has been an extraordinarily poor decision making tool.

As charted below, years invested under a Democratic president have outperformed a Republican president, but staying invested regardless of party compared to only investing when either a Republican or Democrat is in the White House has had massive outperformance!

Election Day 2020 is 5 weeks away and there are plenty of "what-if" questions to ponder and it seems certain that it will create uncertainty. I like most of you will be happy to move on and have it behind us and believe that trying to predict the election's outcome is less important than having a plan. Risk management, not headlines, will guide our portfolio decision making. Whether it is Trump or Biden, we will play the hand we are dealt! And whatever side you're on, we're on your side and we will work diligently for you for the best long-term outcome.

It is normal to feel anxiety over the current market volatility. We are here to help! Please reach out to our office if you need to discuss your financial situation.

Parker Christiansen

CEO / Wealth Advisor

Presidio Wealth Management

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