Dear Friends:

Who You Should Vote for in the 2020 Election? (just kidding, of course)

Recently I (Mitch) was talking with a pastor friend who lamented that “talking about Heaven makes people happy, talking about Hell gets you yelled at, and talking about politics gets you a new pastor!”  However, the 2020 Presidential election is top of mind for most investors and businesses in America and frankly around the world.  It is a time of great uncertainty and as we know markets generally don’t like uncertainty and so it tends to increase volatility.  The good news is that volatility often creates opportunity and we see that environment now.  Even though many of the big, dominant companies are up this year, the vast majority including 73% of the stocks listed on the DOW are down significantly on the year creating opportunities, particularly in the small and value company spaces that have been beaten down.

In many ways this season seems like the 2012 Obama/Romney election cycle.  During that election season there was a lot of concern that if Romney got elected he would unwind all the programs that had been previously implemented, and that if Obama was re-elected he would get to fully implement some higher tax items on his agenda and the polls were extremely close.  Interestingly as the market struggled to project a winner it sold off almost 10% in September that year.  Similarly, in 2016 the market sold off during Jul-Oct by about 6% only to rebound 15% through the end of the year.  So, volatility is expected, and we plan for it and look to take advantage of it.  As well-known financial writer Nick Murray says, “the only sure way to capture the full permanent return of equities is to be willing fully to capture the temporary declines.”

The most pressing question is “Has the uncertainty been baked in?”  A recent CNBC poll showed Joe Biden leading by 14 pts.  This would seem to indicate a Biden victory would not surprise the markets, and a Trump victory might surprise the markets, and it’s possible neither or both lead to a sell-off as the potential for tax law changes could be lower.  Which leads us to the next topic…

Significant Tax Change Proposal Summary for Each Candidate: 

Although there are many components to the potential tax law changes, we have included some highlights below with pros and cons on each side that will drive the need for financial/tax planning changes:

TD Ameritrade/Schwab Acquisition Will Be Beneficial and Won’t Impact Clients in the Short-term

Just a heads up that the TD Ameritrade and Schwab Merger has been approved and finalized on 10/6 and this may spur some communication for clients on the TD platform.  However, there is nothing you need to do and at least for the rest of the year no changes are expected for client accounts.

We are thankful to work together for the benefit of your families and businesses!

Mitch and Destin