By: Tim Chubb, Chief Investment Officer at Girard, a Univest Wealth Division
Many of our clients have been voicing concerns about the upcoming election. The common question is if they should pull out of the stock market until after the election. Does it make sense to sacrifice potential gains in favor of protecting current assets? To answer this, there two things worth addressing – the first is the election and the second is market timing.
With regard to the election, prediction markets are suggesting a Democratic sweep to control the White House, Senate, and House of Representatives. It is important to keep in mind that the market is forward-looking and I believe investors are generally aware of how Democrats have performed in polling recently, therefore, election results may not come as a surprise to investors and cause nearly as much volatility as some are concerned.
That being said, the Senate is very much up for grabs. If the Republicans are able to retain control, it could lead to more ‘status quo’ despite who ends up in the White House for the next four years. The Republicans currently have a 53-47 Senate majority but have 23 seats up for re-election in November while Democrats have just 12 seats up for re-election. The latest polls and prediction markets indicate the Democrats are likely to capture six seats and lose one seat for a net gain of five seats which is enough to gain majority control of the Senate for the first time since 2014. However, as is the case of the presidential election, the winners of close Senate races may not be known until well after Election Day when all the mail-in votes have been counted – a unique characteristic for the election this year due to COVID-19. Meaning, it could be some time before the market reacts, if at all, since the results may not be clearly known immediately.
Although Presidents can implement executive orders, legislation requires Congressional approval hence the importance of unified control under a single party of both legislative and executive branches. This makes the Senate the race to watch.
So far, the performance of stocks that are sensitive to a potential increase in corporate tax rates has not reflected the changing probabilities of the election outcome while healthcare stocks have underperformed of late. This leads us to believe that the market is still digesting this potential outcome and is more worried about the economic rebound than the election.
The major consequence of a Democratic sweep is the proposed tax policy which has garnered the most focus from investors thus far. While higher corporate taxes will reduce corporate earnings, there could be other policy measures that offset some of these losses such as a softer stance on trade policy, greater government spending, and other policy measures. With the economy on shaky footing, it is possible the Democrats will wait a few years before attempting to push through policy that would hit corporate earnings.
With regard to market timing, our mantra has always been to stay invested, stay disciplined, and take advantage of volatility in the market. Market timing, while tempting, involves getting two nearly impossible decisions right – when to sell and when to get back in.
As a long-term investor, trying to time market tops and bottoms is a fool’s errand and the evidence is overwhelming that most investors diminish their long-term returns trying to do so. Investors become more likely to chase the market up and down, getting whipsawed, buying high and selling low.
Through the end of last year, $100,000 invested in the S&P 500 from December 31, 2004 until December 31, 2019 has led to 9% per year in performance, growing that sum to $364,180. If an investor missed the best ten days, the return was only 4.13% per year – or $183,850 at the end of last year. In time, this problem has significant consequences as the next 50% move higher in the S&P 500 lengthens the gap between the person missing those ten best days and being fully invested by ~$271,000. We would recommend rebalancing into this weakness, hoping to take advantage of a volatile market environment and possibly catch some of the best prices in the market cycle.
The bottom line is the U.S. stock market has been resilient throughout its history and stocks routinely recover from short-term crisis, just as they have as recently as the March lows. By trying to predict the best time to buy and sell you may miss out on the market’s biggest gains, making the decision more costly than taking the speed bump in the first place. On Election Day, we’ll all wake up and trends like consumers buying more groceries online, companies spending more on cloud infrastructure, and folks going to the hardware store will still be relevant, making for exciting times to be an investor in our country.
We look forward to sharing more in the coming months as details become clearer on policy. While we’ll be watching the presidential and congressional elections, the economic recovery is a more important priority and focus for the market right now.
Given the ongoing changes due to the global pandemic and the significant investment implications, working with a financial advisor can help you navigate the market and create an investment strategy that matches your time horizon and risk tolerance. To have a conversation about your financial goals and how we can help, please reach out to a Girard advisor.
This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. The information in this article, and any opinions expressed therein, do not constitute a recommendation or an offer to buy or sell any security or financial instrument. Viewers should consult with their financial and/or legal professionals before making any financial decisions.
Any index or indexes referenced are not managed and cannot be invested in directly. Past performance is no indication or guarantee of future results.
By Kevin Davis, VP & Senior Benefits Consultant at Univest Insurance
As we face the uncertainty of the impact of the coronavirus pandemic on our economy, public safety and our individual health, we are all looking for assurances from our leaders and employers. One of the biggest factors that contribute to the success of any business is the ability to perform together as a team. With the recent uncertainty and increasing competition, it has become extremely important to encourage creativity and collaboration among your employees in order to improve productivity while also promoting both physical health and healthy employee relationships.
At Univest, we highly value our culture and truly believe it drives performance. We also realize that culture isn’t something that just happens – it needs to be defined and cultivated. We firmly believe that an engaged workforce who follows a common set of fundamental behaviors creates success. The Univest Way consists of 18 fundamentals that describe the daily principles and practices that make our five core values come to life and truly serves as the foundation of our culture.
One of my favorite of our fundamentals is “Collaborate.” Which the Univest Way defines as, “Break down walls, eliminate silos, and work together, for the good of Univest, your customers, and each other. Be there for each other and be willing to step into another role or help a co-worker when that’s what’s required for success. Help each other to succeed. ‘It’s not my job’ is not part of the Univest Way.” The phrase “we are all in this together” has represented our collaboration as a society as we’ve faced a pandemic and now as we are trying to come back together.
One of my favorite songs is “Unity” by Shinedown. The lyrics have resonated with me relative to collaboration as the band sings, “Shine a light in the dark/let me see where you are/’cause I’m not gonna leave you behind.” Life and business are all about partnerships – working together we achieve more than we can on our own.
Encouraging teams to work together towards a common goal by sharing their ideas and skills often results in employees who are more effective and efficient in their work compared to people who work on projects on their own. Collaboration is especially important to cultivate when teams work virtually, as many have had to over the past few months. The sense of team spirit is felt most strongly when victories can be shared. Employees are more likely to continue working for a business longer when they have strong ties with the people they work with and feel that they’re a part of something important. As the saying goes, “two heads are better than one.” Through collaboration team members can balance out each other’s strengths and weaknesses.
What is your company’s culture and engagement strategy? The employers who embrace the power of collaboration and have strategies in place to communicate their culture and promote employee engagement will be in the best position going forward.
An experienced employee benefits consulting firm like the team at Univest can identify which strategies are best for your company and create a roadmap to implementing them successfully. Not sure where to begin? An advisor at Univest Insurance can help you determine what is best. Please feel free to call us at 610.904.6029. We are all in this together and can help you determine the best approach.
Insurance products offered through Univest Insurance, Inc. are obligations of the issuing insurance companies, not obligations or deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the United States.
By Chris Carter, VP and Area Sales Manager at Univest Home Loans
Only a few months ago, the United States economy was chugging along at a respectable pace with low interest rates, a record-high stock market and 3% unemployment. These impressive stats supported a seemingly financially sound and stable 2020, but the arrival of COVID-19 quickly dispelled this Goldilocks story before the end of the first quarter. With businesses forced to close amid stay-at-home orders, unemployment skyrocketed which, quite obviously, impacted the normally robust spring real estate market.
With unemployment at its highest level in decades, lenders have been forced to verify and redocument income and employment status for clients up until virtually the last minute before securing funding. Borrowers with lower credit scores may find themselves unable to secure the same financing as before the onset of the pandemic. Some secondary financing, such as home equity loans and lines of credit have been eliminated altogether at several lending institutions. Government-sponsored enterprises such as Fannie Mae and Freddie Mac, along with mortgage insurance companies and other agencies (HUD, VA, etc.) have generally tightened up underwriting guidelines and credit overlays.
Simultaneously, interest rates have plummeted to incredible lows which has prompted record refinancing. For many, this phenomenon has clogged pipelines, delayed desired closing dates and, in some cases, forced lenders to indefinitely postpone transactions, disallow interest rate locks and/or make their pricing so unattractive as to discourage would-be customers until the volume subsides.
Remarkably, Univest Home Loans has maintained its 1-2 day underwriting turn-times and continued its sterling 98% customer satisfaction rating all while setting and breaking record loan production. Not a single purchase closing has been missed or postponed. Appraisal waivers and exterior inspections have allowed us to process and fund hundreds of transactions per month. And, we have only slightly adjusted our consumer lending model for potential home equity borrowers.
As a bank with our own money to lend, Univest can self-fund and rely less on wholesale arrangements than our competitors whose warehouse lines have been cut and some face margin calls. Our 100% local team has transitioned to working remotely seamlessly. Unlike other lenders, Univest Home Loans, can originate portfolio transactions as an option for alternative and specialized financing. Our expansive product line, which includes construction-to-permanent financing, lot loans, swing loans, and first-time homebuyer grants (to name a few), remains available. During these uncertain times, Univest’s experience serving local communities over the last 144 years has proven to be an asset.
Interest rates are at historic lows, despite the uncertainty, and now could be a good time to buy or refinance. However, headlines on coronavirus and its impact change daily which has created an
ever-fluid situation. Contact a Univest Home Loan consultant at 877-723-5571 or email@example.com for the most current information and to learn more about what we can do for you in these challenging times. If you find yourself financially burdened with your existing mortgage, contact your servicer immediately for options. Be safe and stay healthy!
Univest Bank and Trust Co. is an Equal Housing Lender. NMLS #415882