There are various post-election scenarios to consider, including gridlock arriving via former Vice President Joe Biden winning the White House, Democrats maintaining control of the House and Republicans doing the same in the Senate.
The situation sounds ominous, but it could actually work in favor of equities and advisors can prepare for that scenario with the WisdomTree Core Equity Model Portfolio.
“This model portfolio is designed for growth-oriented investors with a long-term horizon looking to maximize long-term potential for capital growth through a globally diversified set of equity ETFs,” according to WisdomTree.
A prevailing thought around election time is whether or not the market will see significant shifts, depending on the outcome. There’s also a matter of how this continues to factor into uncertainty, let alone what benefits come from making stimulus-related decisions before or after the election.
Betting on Political Gridlock
Gridlock makes it difficult for one party to get all of their legislative priorities accomplished, but it can be beneficial to investors as WisdomTree points out.
“Political gridlock remains in Washington, DC, with lower growth, a bipartisan spending blowout and an environment where Fed policy is once again a primary driver of and influence on economic and market outcomes,” according to WisdomTree research. ”This scenario may also see an “easing” of anti-China rhetoric. While both parties are currently “anti-China” (for different reasons), Biden is likely to soften the rhetoric against this important trading partner.”
The Core Equity Model Portfolio covers plenty of bases, featuring exposure to domestic and international equities across the large-, mid- and small-cap spectrums.
Compared to an expectation that stocks would be down, given Democrat Joe Biden’s jump in the polls, while President Trump was hospitalized and sidelined from campaigning, Wall Street could have easily seen the proposed tax package as a disaster. Instead, Wall Street is saying they aren’t concerned about the Biden proposals.
“From a tax perspective, this is a positive scenario for U.S. equity markets and should lead 2020’s success stories seeing even more upside—technology leading at the expense of the more cyclical reopening-sensitive sectors like small-cap value strategies,” notes WisdomTree.
Fifteen percent of the Core Equity Model Portfolio is allocated to three small-cap dividend ETFs addressing U.S., developed ex-US and emerging markets equities. Another 16% is allocated to domestic large- and mid-cap dividend strategies.
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.