The race for the White House and control of Congress will be determined in less than 50 days. As election polls tighten, President Trump and former Vice President Joe Biden will battle for the 270 of the 538 Electoral College votes needed to be elected. As for the Senate, the Republicans currently hold a 53-47 advantage, however 23 Republican-held seats are up for re-election, compared to just 12 Democratic-held seats. In the House, all 435 seats are up for re-election. The Democrats currently control the majority with 232 seats. While predicting the outcome of these elections has proven to be unreliable (as Hillary Clinton and President Trump learned in 2016), investing in these environments has offered a clearer path.
Peloton Capital Management is a research-driven investment management firm. We rely on our experience as Portfolio Managers to make informed investment decisions and to help our clients achieve successful portfolio outcomes (goals-based). Our portfolio management team understands how capital markets respond to uncertainty (e.g., elections) and that there may be interim volatility around this election. However, that volatility is unlikely to warrant significant portfolio changes. Investment time horizons extend far beyond election cycles and presidential terms. It’s critical to stay disciplined to your custom investment strategy. Timing the market is not an investment strategy, it’s a binary bet that more often than not loses (no less so during an election). It’s also critical to remember that investing in quality companies has been a proven wealth creation tool across a wide range of different political scenarios over the course of many decades. Politics can bring out strong emotions and biases, however investors would be wise to put these aside when making investment decisions.
Investors should instead continue to monitor economic and company fundamentals, favor quality in both equity and fixed income, and maintain a well-diversified portfolio. Peloton’s competitive advantage is research and managing individual securities. We invest in real operating companies which have fortress balance sheets, global brands, and strong cash flows to navigate (and thrive) through uncertain election cycles. Additionally, our higher-quality investment philosophy assigns a premium to the strength of the company’s management team. We favor experienced CEOs and operators who have proven track records and perform under different political and policy environments. Fundamental research and active investment management are effective tools to contend with election season volatility.
This is an especially important time of the year, in an admittedly unusual year. Emotions run high and costly mistakes can be made. Stay focused on your investment goals and objectives.
Past performance is no guarantee of future results. Investing involves risk, including possible loss of principal. Diversification may not protect against market risk or loss of principal. The opinions expressed above should be construed as neither investment advice nor a solicitation to buy or sell securities. Actual investor results may vary.
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