Stock market volatility ahead of the election is expected. Some investors may want to be defensive, while others can look straight through the election and have confidence in the economy.
In the past month, the S&P 500 has risen 7.7% before falling 3.2%. All sectors have participated to some degree at least in the up and downs. The election-related risk has migrated from an anti-Biden market (one that fears corporate taxes rising to 28% from 21% and lauds a Trump second term) to fears that ballot-counting issues could create general uncertainty over the victor and therefore the direction of policy. But with Congress expected to be relatively even between both parties, the ballot-counting risk is the most pressing. And it's also the most short-term and the least fundamental risk.
"We're cautioning our clients not to get too trigger happy wit their portfolios around the election," said Michael Reynolds, investment strategy officer at Glenmede. "For long-term investors, staying the course is certainly the way to go.
For short-term investors, safe asset may perform well for a few weeks while stocks are volatile. Long-term investors looking to add to stocks or other risky assets may want to wait until the volatility has calmed.
Reynolds agrees that policy changes are unlikely to be drastic. "We're modestly positive right now on risk assets," he said. "We're maintaining our longer-term purpose."