Tech Wins No Matter Who Wins Election?

By Mitchell Anthony

September 30, 2020


With the election around the corner investors are getting nervous about the impact a Biden victory might have on the equity market and the leadership in the equity market.  Thus far, since Washington, the Congress, and the central bank declared war on the pandemic, the equity market has roared and the leadership has been centered in technology stocks.  The reason is simple – These companies are leveraging the current environment and have a tailwind at their back.  Cyclical stocks like airlines, hotels, and restaurants have begun to recover but the outlook for them is still very uncertain and highly dependent upon the termination of the virus. This group may not win no matter who wins the election or conversely could win with either candidate based upon the virus outcome.  However technology is likely to win no matter what the outcome of the virus is and no matter what the outcome of the election might be.

Economic Drag from Virus will be Problem for Either Candidate Post Election

The containment of the virus is still unknown and may not happen until the second half of 2021 or later. Further the actual termination of the virus may never happen or may be years away. Given this it is hard to imagine and accurately forecast when economic drag from this virus will no longer be a significant problem for the economy. What is certain is that there will be headwinds for at least the next year.  Our next president will have to address these headwinds and manage this problem.

Fiscal Stimulus Party will continue Post Election?

Both candidates as well as the Congress and the central bank have expressed deep commitment to do whatever is required to keep our economy moving forward while we contain and terminate this virus.  As result fiscal policy has been loose and over 3 trillion of stimulus has been injected into the economy thus far.  The Democrats have proposed another 2 to 3 trillion of stimulus which has been opposed by the Republicans because of the way the stimulus is allocated. It would seem that the republicans will eventually fold.

If Trump and the Republicans prevail then the stimulus party will continue on their terms. However if the Democrats and Biden prevail then the stimulus party will continue but with broader support for individuals and democratic states.  Either way the stimulus party will continue and the markets will rise as loose credit works its way into stocks and bonds. It is likely that Soft economic conditions will remain for an extended period forcing either candidate to keep economic policy at the front of their agenda and behind either capitalistic goals (Trump) or socialistic goals (Biden) they have for the longer-term.

Everything from home Investment theme will Continue Post-Election?

Given the current outlook for containment of the virus we expect the everything from home theme to continue for much of 2021.  This extended period of working and doing almost everything from home has had mixed responses from those involved but it is notable that a significant part of our population is becoming entrenched in doing everything from home and this may well become a secular theme globally.

As a result of this secular change in the way people are behaving and working we expect continued acceleration in earnings growth for:

Tech Enabled Consumer Retailers.

Tech Providers for Consumer Retailers.

Cyber Security Providers.

Digital Payment Providers.

Social Media Service Providers.

Digital Content Distributors.

Digital Device Manufactures.

Liquidity is still high

There is tremendous liquidity in the marketplace and lots of fuel to push stocks higher as sentiment improves about stimulus and growth.  Markets are driven by liquidity and leadership in equity markets tends to be driven by leaders in earnings growth.   The earnings growth we expect from the stay at home names noted above will likely be the best in the marketplace and as a result these names will do well in the year ahead no matter who wins the election as liquidity and accommodative monetary policy has been embraced by both candidates.

We remain optimistic.