Monday Morning Wrap Up – November 2, 2020

Countdown to Election Day.

In a watershed event, Americans will conclude their voting in the 2020 U.S. Presidential election this Tuesday evening. A record number of early voters have already voted. And, the clock is ticking before polls will close on Tuesday evening for good.             

What’s at stake? The White House, 35 Senate seats and 435 House of Representative seats are on the line.

Election officials have widely broadcast that final tallies won’t likely be available on Tuesday evening in light of mail-in ballots used during the COVID-19 health crisis. Many states, by law, are unable to begin counting mail-in ballots until the polls close on Tuesday evening, which could mean final results may not be available for several days to a week.

Gold wins no matter which party controls the White House.

Looking ahead, we use history as a guide to forecast higher gold prices ahead no matter who wins the presidential election. In fact, gold’s performance has been roughly equal under both Democratic and Republican presidencies.

“Since 1971, gold returns were 11% on average per year during Democratic presidencies and 10% during Republican ones,” the World Gold Council said.

Stocks plunge – worst one week sell-off since March.

It was a rough week last week on Wall Street.

Rising COVID-19 cases and political uncertainty drove the S&P 500 down 5.6% in only 3 days.

As the virus rages across the world and expands aggressively in the United States, Wall Street investors pulled out of stocks. With hopes of an economic stimulus package on hold for the foreseeable future, the U.S. economy faces a bleak couple of months. Stock investors know this – and that’s why they are running for cover.

The second (or third) wave is here.

COVID cases hit new all-time highs here in the U.S. last week as the health crisis expands unabated.

Several countries across Europe were forced to lock down as the virus spread again there. France made global headlines after announcing a nationwide stay-at-home order in response to the surging COVID cases and hospitalization rates there.

GDP data mostly a wash.

Gross domestic product data last week revealed the U.S. economy grew 33.1% in the third quarter.

So what.

That comes after falling 31.4% in the second quarter. The third quarter gains can largely be chalked up to the economy reopening after the spring shelter-in-place orders and the massive emergency stimulus measures passed by Congress. That stimulus money has run out. The economy must now hobble along on its own going forward.

Fed meets this week.

The Federal Reserve meets after the election this week. Expect the central bank to take a backseat to the election results, or ongoing election wrangling. There are no changes expected to the Fed’s zero interest rate policy. The Fed is “all-in” on juicing the economy with zero interest rates and massive money printing. It has already set the stage for future inflation here in the U.S. with its unprecedented actions this year – and no matter what it does going forward it will be difficult to put that genie back into the bottle.

Many black clouds on the horizon.  

No matter who wins the White House, that will not instantly erase the COVID pandemic, the economic challenges, the high rate of joblessness, the historic levels of U.S. government debt, and a politically divided nation.

Whoever wins the White House will face perhaps the greatest challenges of a U.S. President ever.

In the midst of these crises on multiple fronts, what’s the world’s favorite safe haven? Gold.

Yes, gold and silver are posting double digit gains in 2020 amid market volatility, political strife, economic recession, joblessness and the worst health crisis in 100 years. Bank of America projects gold to climb to $3,000 an ounce in the months ahead.

Precious metals are acting as a haven in the current economic and political storm. No matter what happens this week, the country still faces incredible challenges ahead and the historic bull market in precious metals is just getting started. You can take that to the vault.

Until next week.

Regards,

David

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