Talking Points – October 2020

October 28, 2020 – One Last Important Election Chart

Hopefully, one week from now we know who has been elected President. The various voting scenarios and resulting potential effects on financial markets have been covered from every angle and we are all ready to have this election behind us.

We wanted to provide one last and very important chart as it pertains to the election.  Historically, when stocks are in an uptrend, as they are now heading into the election, 3-6 month forward returns are well above average. If we were in a downtrend, historical returns are poor.

Source: Strategas Research

The likelihood of volatility and price, whipsaws in both directions after the election are high. Don’t let shorter-term noise distract you from your longer-term plans.

October 21, 2020 – Stocks Slowly Changing Hands

Amazingly, about 250,000 people turn 70 every month in the U.S. We have all heard for most of our careers, about the far reaching potential effects the large baby boomer generation could have on financial markets. The time is now, as baby boomers and the silent generation make up 70% of stock ownership.

Source: CNBC.com

There are likely to be a variety of impacts this gradual shift in money has on financial markets and importantly financial planning. It also brings us back to the importance of longer term trends versus short-term headlines and volatility.

October 14, 2020 – Stocks Factoring In Election

While it has at times felt like it would never actually arrive, we are now just three weeks from the election. We have all seen the polls and predictions, but we also all remember how well those worked four years ago.

Today, we want to look at what specific groups of stocks are doing that could be heavily influenced by the election outcome. The blue line below is a basket of stocks expected to do well in a Democratic President victory versus a Republican President victory portfolio in 2016. So, despite the polls expecting a Clinton victory in 2016, the stocks weighted towards a Republican win were outperforming heading into the election.

Now, looking at the red line it reflects the current Democrat portfolio vastly outperforming the Republican portfolio in this current run-up to the election.

Source: Strategas

Even if the polls end up being correct this time around, the Democrat winning stocks may have already factored much of that in with strong recent price performance. In addition, there are many examples of industry groups expected to perform a certain way under a particular President that did not pan out. Trump was expected to be good for coal and those stocks have all gone to nearly $0. Obama was expected to be bad for healthcare and the group was a huge winner during his presidency.

Expect plenty of stock market price whipsaws in the days after the election. It will be more important than ever to make financial decisions based on a preset plan and a long-term view.

October 02, 2020 – Steady Wins The Race

Most of you know our affinity for dividends. Today’s chart is the latest example of why we find them so appealing. The trend for dividends has been mostly steady, going from the bottom left of the chart to the upper right. It is the direction we want our stock charts to take, but any stock chart is going to be much more volatile than dividends.

There was of course the cut in dividends during the financial crisis from banks, but the index exceeded old payment levels quickly. This year dividends are estimated to come in roughly in line with 2019. We think that is impressive considering all the consumer related companies that were forced to eliminate their dividend.

Source: Strategas

At Lakeview, we have found investing in high-quality companies allows for reliable dividend payments and growth. For many investors this growth of income compounding over the years goes a long ways towards reducing the occasional stressful periods when stock volatility increases.

Source: Greg Towner, CFA, CMT

Disclosures