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Economic Outlook

By: Russ Colbert
Fall 2020 (Vol. 38, No. 3)

The election at this time has not been certified, and court battles will continue for at least a month or two until it looks as if a conclusion is near. It appears the pollsters got it wrong again. We also found that American voters do not want a shift in economic policy. President elect Biden has declared victory based on media statistical evidence, but states have not certified the results at this time. President Trump is pushing back with many cases to the courts, and a number of recounts in some states because of the closeness in the results. The odds seem to favor Joe Biden for the next four years.

It looks to me that Joe Biden would be working with a Congress that is much different than the one the pollsters expected. It appears after Alaska and North Carolina report that the Republicans will have 50 seats in the Senate. In January there will be the runoff for two more Senate seats, and it looks as though the Republicans will win at least one seat giving them 51 seats and Senate control.

Looking at the House of Representatives so far it appears the Democrats may have lost around 10 seats at this time. We expect the Democrats to come in around 224 and the Republicans about 211.These losses may cause the moderate democrats to push back against the more progressive members. The pushback may stick because Republicans around the country in the House and Senate races won by strong margins and lost by small margins. They also won many state races increasing their power. I believe this increase for the Republicans will make it much harder for any new policy changes such as passing a major tax hike, Medicare for all, court packing, and the Green New Deal. It is true a Biden administration will create more regulations, but all the new federal courts and Trump appointments will try to make sure all departments and agencies stick to their legal mandates passed by Congress.

We are expecting Congress to pass a stimulus bill that will not bail out states. It should be focusing on unemployed workers, small business, and distribution of the vaccine. Looking into next year we should expect some sort of infrastructure package passed by both Republicans and Democrats. There might be an increase in the limits on itemized deductions on state and local taxes. This would be considered a tax cut. The trade wars will most likely be over. It will be difficult for a new White House to go easy on China or on reversing the progress on peace made in the Middle East. But we will wait and see how it develops.

The economy continues to keep growing and business performance continues to get better. The latest GDP figure for the 3rd quarter was outstanding. The revenues are better than expected and companies have adapted to the challenging times. Unemployment figures that were over 20% during the first half of this year have dropped below 7%. Now with a vaccine and more good news coming on the treatments of Covid-19 we should continue to see improvement in this area. We believe Fiscal policy should not change in a major way, and with continued low interest rates and entrepreneurial power of our economy, the stock market should continue to grow. Again, I think if the Republicans hold the Senate and the gains made for them in the House of Representatives should be more favorable for the stock market.

If you have any questions or need a free portfolio review to keep you on track with your investments or retirement plan, please call me.

Russ Colbert
Senior Portfolio Manager

Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.