Normally, the stock market loses value slowly as the presidential election approaches, because uncertainty is increasing.  Of course, 2020 is predictably worse, as the market is now losing value more rapidly than normal as the election approaches.  This can be understandable, because (1) the election is so ugly and contentious, (2) more race-riots and election-related violence are expected soon, (3) the coronavirus is spiking again, (4) economic lockdowns in Europe are now certain, (5) forest fires have destroyed 4 million acres of California, the worst year ever, and (6) Congress is more useless than usual, unable to pass a badly-needed pandemic stimulus bill.  Oh, did I mention the hurricane season has been the worst year ever?  Of course, uncertainty is higher now than it was in March.  It is small wonder that Consumer Confidence is slipping.

The conventional wisdom is that investors should always “hold-on” as bull and bear markets are normal and routine, and I agree . . . with one exception.  There is nothing normal and routine about a financial collapse, such as we had in 2008.  I was particularly concerned this March, when the dollar was collapsing along with the stock market.  I actually increased cash in most portfolios, because a rapidly collapsing currency is a key predictor of a financial collapse.

Currently, as we enter the election countdown, the market is falling faster than normal, but the dollar is not.  It has been falling slowly for several months.  It is certainly not a collapse.  For that reason, I’m not as concerned about a financial collapse now, as I was in March.  Another reason is that we know a great deal more about Covid-19 now than we did in March.  Cases are up, but the death rate is dropping, and a vaccine is close.  The conventional wisdom is holding.

Nonetheless, the higher level of uncertainly will continue to  drive the market down, but it will not collapse.  When will the uncertainty begin to lift?  Not on election day — but whenever the election results are accepted by both sides.  Hopefully, with a vaccine in mass-production by year-end, turning the calendar page to 2021 will be a pleasure.