Start the conversation
So the country woke on the morning of Nov. 4 to no decisive outcome in the most contentious White House race in the modern era.
But, if you've been following along with our coverage, you've known for weeks that this time we wouldn't necessarily have a final result in hand by sunrise Wednesday.
As of midday, it's up in the air, to put it mildly; it's "too close to call," as both candidates have more than one plausible path back to the White House.
I was able to sit down to a "morning after" Zoom call with Shah Gilani, our Chief Investment Strategist, to get his unique take on what this all means and, above all, the best ways to trade and invest for this in-limbo outcome.
And, like Shah's going to say in this edited interview, the uncertainty around the election has done little or nothing to stop the bullish mega-trend he's been talking about here and on national television for years now.
More than that, it's opened up some nice opportunities…
A Q&A Session with Shah Gilani
Greg Madison: Morning, Shah! Thanks for talking with us after such a long night.
Shah Gilani: Of course – anytime!
GM: So, the markets opened up this morning, and from the looks of it, they haven't looked back. We're seeing very strong "up" action on the big indexes.
SG: Yes, they're up, and they were up in the premarket, but interestingly, not as "up" as they appeared overnight. It was really, really volatile, and at one point, NASDAQ 100 futures were up 3.5%, to the limit. There was an 800-point swing on the Dow.
It was really interesting to look at equities through the lens of the bond market. When it looked like Biden had a solid lock, the bond market sold off – I think the 10-year Treasury yield got as high as 0.94. It was like the bond market was saying, "If we get a Blue Wave, we're going to see massive spending and the reflation trade is going to work."
GM: Reflation trade?
SG: It's when growth and inflation creep back in. The dollar tanks, but stock markets go way up.
When Trump caught up, yield came back down to 0.82 and then fell further as he won some big states. It was like the entire market thought it got ahead of itself and began to think "contested election," which sparked a flight to quality. The bets were just absolutely flying.
But the market ultimately opened up off those overnight highs, but of course still up because it looks like Biden has multiple avenues to the White House.
GM: So not quite the blowout the Street was expecting?
SG: No, but like I said, we're still seeing strength in stocks right now, and I think a lot of that is because of momentum, but a lot of it has to do with the fact that Wall Street sees upside – optimism – virtually no matter what happens, Biden or Trump.
GM: And you believe that's significant?
SG: Well, the prevailing wisdom, or assumption I should say, is the market usually responds well to divided government, which we could very well have. Whether or not that's a good assumption is a story for a different day!
So, in any case, I think the market is looking at the prospect of a Biden presidency, a blue House, and a Republican Senate, and thinking, "Well, that's not so different from what we were expecting, and Republicans will be a check on higher taxes, anyway." They're thinking the odds are better for stimulus – which we do need – and infrastructure spending. I think if Trump is reelected, we'll still get those, though they may look different.
You know, it's morning in America, again. The sun did rise this morning; the Earth is still turning…
GM: And the bull is still running?
SG: Absolutely! And that's interesting because, when you get right down to it, the election won't really fix or "solve" anything – at least it's not likely to. The fault lines, the disunity, the hard feelings, are all still there, but so are the powerful bullish forces we've talked about before. The market knows stimulus is coming; it's just a question of when. The market knows the pandemic will end and we'll come out the other side. It knows the recession will end someday. And the market knows, come noon on Jan. 20, 2021, we'll have a president – we just don't know who yet.
And, you know, I think the market is probably right about this. I certainly wouldn't bet otherwise, and I'd caution anyone against betting otherwise.
GM: Well that's my next question, the biggie: What do our readers do about it?
SG: Well, first and foremost, there's going to be an incredible amount of loud noise – static – out there about the narrative. Forget about that. Tune it out… unless the market sells off, in which case the noise will tend to point to something actually disturbing investors. I'd say, be bullish, but be careful. I think we will get stimulus at some point, but if it should come too late, after everything's started rolling over, that would be a problem. But to be clear, I don't see that outcome happening; just be aware of it. In the unlikely event that should happen, I will absolutely let readers know what to do.
I think tech stocks are strong and will continue to be strong no matter what, even if we should somehow see more lockdowns – we all saw how tech did during the winter and spring lockdowns. I think the cyclicals are a great place to be right now, too. If you look at what's worked since March, it'll probably continue to work.
Do hedge your bets, though, and tighten up your stops. If we get into the so-called "nightmare scenario" where there's no clear winner and the contest gets ugly, stocks very well could sell off as people take profits off the table – there's a lot of profit on the table right now! Again, I don't see that as being all that likely, but it is something to be aware of. Don't go unguarded, in other words.
If you're in, stay in; I don't see any reason to sell right now.
GM: Shah, once again, thanks for talking to us. Looks like we're in for an interesting couple of days here, but I'd say it helps knowing what to do.
SG: Absolutely. My pleasure.
And before you go, don't forget to check out Shah's latest stock-picking presentation…
You see, Money Morning has launched its first-ever stock-picking lightning round event where our Chief Investment Strategist flies through stocks – more than 50 – telling you which to consider buying NOW and which to drop like a ton of bricks.
These picks will be coming fast and furious, so be sure to take notes. Click here now…