I have a call to make on the election …
There is only one thing that is now a certainty — the pollsters are terrible at their job!
For the second straight presidential election, they weren’t even close to predicting the actual results. The tens of millions of dollars these pollsters are paid to predict winners is flat out theft on their part.
Almost every major poll had Joe Biden winning the election in a landslide. And as we now know, that will not be the outcome. There will not be a “blue wave.”
We also do not know the outcome yet … and it may be days before a winner is declared.
We all hope it doesn’t take weeks to get to a final result the way it did in 2000 with George W. Bush, Al Gore, and the infamous “hanging chad.”
But even with all of the uncertainty, stocks rallied today. Here’s what the market’s initial reaction tells us …
Similar to a lot of people around the country, I was up late last night watching the results in real time. And also similar to a lot of people, I’m tired today.
It won’t surprise you to learn that I was focused not just on the election results but also how stocks were reacting.
It was a volatile night, with stocks down about 1% early and the Nasdaq futures up over 3.5% later as it appeared Trump might win. As the night wore on, it became apparent that a winner would not be declared, which led to some selling and even sent futures into the red for a short time.
But by the time the market opened at 9:30 a.m. ET, the major averages were up over 1%, and buying continued into the afternoon.
There are clearly two possible scenarios. It will either be Joe Biden or Donald Trump at the helm, and reading the action in the market, investors are okay with both.
Part of the reason is that Congress will remain split. Democrats will hold on to control of the House with Republicans maintaining the majority in the Senate. I am not surprised that stocks would be up on a split government, but I am a bit surprised there isn’t more concern about the lack of a clear winner for the White House.
So, what should investors do?
My plan is to continue to with a watch-and-see approach. I’m not selling anything I own, and I am ready to start making moves perhaps later this week. Whatever you’re doing now, it is important to diversify your portfolio and continue to remain in stocks for what will likely be a very bullish 2021. You can diversify into other assets as well, by investing in cryptocurrencies and even private companies, which will not swing in price with the market.
As we wait for the White House outcome, let me share some of my other observations about the market’s early reaction, especially relating to several hypergrowth themes:
- Cannabis legalization went five for five. Five states had legalization initiatives on the ballot and all passed. This sent U.S. cannabis stocks higher on the possibility that it could add $9 billion to the booming industry.
- Infrastructure stocks are down big, led by Vulcan Materials (NYSE:VMC), Caterpillar (NYSE:CAT), and Terex (NYSE:TEX). The concern must be that an infrastructure bill will not see the light of day, but I believe this is incorrect. Both sides want to get a deal done, and it is just a matter of time. That’s why I also believe this pullback will lead to a buying opportunity at some point.
- Solar and wind stocks fell, even though it looks as if Biden has the better odds of winning (at least as I write this). This is really confusing, considering Biden has said he will spend over $2 trillion on clean energy infrastructure.
- Sports gambling stocks are up, led by Penn National Gaming (NASDAQ:PENN), Caesars Entertainment (NASDAQ:CZR), and DraftKings (NASDAQ:DKNG). Three more states — Maryland, South Dakota, and Louisiana – voted to legalize sports betting, joining 18 other states and Washington D.C.
- Healthcare stocks rallied more than 5% to a new all-time high, as it is clear that the Senate will remain in Republican control. Even if Biden wins, a complete overhaul of the healthcare system will be difficult with the Republican senate majority. That has led to a relief rally that is spread across the entire industry.
There are many more important stories going on under the headlines, so you may not hear much about them. But they’re important to those of us who want to make money — meaning you and me. I will keep you up to date on all the action in the coming days and weeks.
In the meantime, hold steady and stick with our plan. Investing in hypergrowth stocks does not rely on one political party or one president to make money. They are much bigger than that, and innovation and growth are unstoppable.
On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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