In most people’s minds, the outcome of Presidential and Congressional elections determines the direction of public policy for the next handful of years. It seems that this year, the outcome of these elections holds far greater weight than just legislative changes. There is increasing uncertainty about whether a clean result will even be generated, let alone what the impacts of those outcomes are. While the outcomes of these elections are not always straightforward, we at Howard Capital Management, Inc. would like to offer a few key trends that investors can use to potentially profit from a shift in power.

Cyclical Outperformance

Based on historical market trends, cyclical sectors tend to perform slightly better during Democratic regimes. The themes for 2020 and the next 2-3 years are likely to continue in the direction of cyclical sectors like Technology, Consumer Discretionary and Energy while the US economy is in a recovery phase. However, if a “Blue Sweep” were to occur, we wouldn’t be surprised to see a broad market selloff. These reactionary selloffs are usually prompted by increased regulatory and geopolitical uncertainty, of which we seem to have no shortage of recently.

There is also tremendous uncertainty surrounding the Energy sector and whether a Biden Presidency would add or detract from that sector. Generally, when we see peaks in uncertainty there is a subtle correlation with positive future returns. We must consider the possibility that, if we see a Blue Sweep the “Green New Deal” policies have a chance of being implemented earlier than expected. Thus, renewable, and sustainable energy sub-sectors could seek to benefit from this regulatory initiative. For Energy specifically, it’s currently plowing through its third-lowest support point since the bottom in late March. It’s far too early to tell which way the sector will go, but it’s a sector that could show tremendous promise in the next 18-24 months.

Technology has held up extremely well through 2020 and considering how COVID-19 will affect the working world for the foreseeable future, we maintain the view that Technology will continue its relative outperformance of other cyclical sectors. While most are concerned about extended EPS ratios, anti-trust suits, regulatory probes, etc. the investors that have ridden the Technology wave through 2020 have profited greatly. Whether it’s time to take gains off the table is something else investors should ponder. Biden has explicitly stated he will raise the capital gains tax to the ordinary income rate for those earning more than $1mm.

Contrarian View

The outcome of the Congressional elections is as important – if not more so – than who is sitting in the Oval Office in January. The probability of a “Blue Sweep” brings far more uncertainty to the markets than a Biden presidency and mixed Congress would. Two of the worst scenarios for market growth historically occur with a Democratic President/Mixed Congress or Republican President/Mixed Congress. Contrary to popular belief, a gridlocked Congress is relatively stable for the markets as they know exactly what they’re getting, nothing.

What Can I Do Now?

Knowing that volatility is expected to rise over the coming weeks, what are investors to do? Our simple answer: Do not make knee-jerk reactions on your own and trust the professionals and systems they have developed to withstand whatever may come to pass. At the end of the day, a contested election result is not a given; a decisive result is also not a given but is certainly possible. They key now is to remain focused on what you can control: your emotions, your strategy, and your goals.

Howard Capital Management, Inc. has seen uncertainty come and go. The only things we can say for certain is that the HCM-BuyLine® has been aiming to mitigate downturns for clients since 1997, and we will continue to respect and implement its decisions. Regardless of how events unfold, we must be strategic and tactical to bring our best defense against a market that does not think or feel.


This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50