The US election plays out like a political high drama television show with twist and turns at every moment. There was an initial prediction that Donald Trump will win the Presidential election with him leading in many key battleground state, but as the mail-in ballots get counted, Joe Biden starts to close in the gap and took initiative to lead the ballots and went on to win some key battleground states. However, Donald Trump, on claims of widespread voter fraud, refuses to concede on his losses and initiated a series of law suits trying to overturning the mail in ballots.
Shortly after Biden announces that he won the US Presidential election, Pfizer announces a vaccine with a 90% effective rate and this gave a big boost to the stock market that a light at the end of the COVID-19 pandemic tunnel is in sight.
COVID-19 Made a Comeback in the Western World
COVID-19 infection rates saw a sharp spike in Europe as the Northern hemisphere heads and forced a nation wide lock-down in major parts of Europe. The lock-down exerted a downwards pressure on major European stock market, causing the European stock market to underperform the American and Asian counterpart.
Meanwhile in US, the Trump administration has more or less gave up trying to combat the virus and instead, focused on trying to keep President Trump in power by disputing the election results. The COVID-19 infection numbers hit a record high and continue to climb while some of the hospitals in hard hit states started to see their intensive care unit being overwhelmed by the surge in number, forcing some of the state governors to initiate new lock down measures. The fear for now is that without a coordinated effort from the federal government, the COVID-19 situation in US will get worse and worse as Joe Biden takes over the Presidency on 20th Jan. This may force Joe Biden to impose a national wide lock down which will have a big implication on the stock market come January.
Whether the stock market can be stabilize by than will depend on a few factors which includes the possible roll-out of a fully developed vaccine, a much needed fiscal stimulants to put money into the pockets of businesses and individuals by a US federal government and how divided the US federal government is, as a result of the power struggle between the Republican and Democrat party. One of the outstanding issue is that the control of the US senate is not known yet as the state election of Georgia, is unable to determine the winner yet as Georgia has a requirement that the winner needs to get more than 50% of the votes while candidates from both parties obtained less than 50%. The winner of this election will determine which party controls the senate and should the seat falls to the Democrat, they will be able to control the entire federal government and roll out measures much more faster without needing to work through a Republican controlled senate. The ideal situation is for the Democrats to control the entire government for a fast roll-out of anti-COVID measures as well as economic boosting measures, but judging from the voting patterns of the state of Georgia, Republican looks poised to control the senate, making the life of President elect Joe Biden's life difficult.
Portfolio Strategy
The last portfolio put us in a good position to capitalize on a possible worsening of the COVID-19 situation in US. The recent rally in the beaten down energy and transport stocks due to announcement of a possible vaccine may not sustain should the COVID-19 situation worsen in the west and the healthcare companies are unable to produce and distribute the vaccine fast enough to make any differences till late 2021.
As of now, investing in Tech is still the best bet, as it is the best defensive sector against a possible surge in COVID-19 situation and still one of the best sector to be in the future due to the lifestyle trend of a post COVID-19 world.
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