Cumberland Advisors Market Commentary – Markets, Election, Axios Poll

Author: David R. Kotok, Post Date: July 31, 2020
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For the next 100 days or so, the growing focus on the US election may drive news flows and alter markets. Remember, though, there is a chasm between what polls are saying now and what markets are pricing as expectations for tomorrow. Most market agents are looking at 2021 and are now focused on a COVID vaccine and a post-COVID economic resurgence in 2022 and 2023. Those agents also look at the many other factors that influence markets, including the level and direction of interest rates, the prospective rate of inflation, the bankruptcy rate, the employment/unemployment statistics, and the developing Cold War between the world’s two largest economies, China and the United States.

For the news flow, the focus is on COVID-19 – its infection rates and death rates,  testing and antibody testing, crowded hospitals and shortages of PPE, and rushed development of treatments and vaccines that will work and be available in wide distribution. Unfortunately, the United States has become the world leader in terms of the chaotic and confusing administration of its coronavirus response and in terms of resulting cases and deaths. We have endured so many inconsistencies in the last six months, and we are paying the price. We practice blame-game politics rather than responsible planning. Market agents have accepted the American mess for what it is, but most agents wish it were otherwise.

The divide in America is over who did what (or failed to) and who is responsible. We are divided over whom to believe and whom to distrust. How do we know what the truth is, and where do we find facts we can rely on?  About one-third of us believe one conspiracy theory or another even though there is no hard evidence to support our belief.

Below is a link to a recent Axios poll. It vividly depicts the divides on these questions and the changes that are occurring in public perception. It also provides a warning about how volatile this election cycle will be. Readers may want to spend a few quick minutes looking at the poll numbers and thinking about the gaps in viewpoints.

“Axios-Ipsos poll: The skeptics are growing,” https://www.axios.com/axios-ipsos-poll-gop-skeptics-growing-deaths-e6ad6be5-c78f-43bb-9230-c39a20c8beb5.html.

Note the diversity of views. We see that at Cumberland among our cohort of clients, consultants, institutional and family office managers, and among our clients’ lawyers, accountants, actuaries, and other professionals who interface with them.

Example: One client that I personally talk with and have known for decades gave me an earful about how highly credible Laura Ingraham is on Fox News and how she is his primary source of viewpoints about the virus and other issues of the day, including the Biden-Trump contest. He believes that China is responsible for the virus and for undermining America’s medical response. The conspiracy theories running rampant in America have become credible to him. He is a 100% Trump supporter.

Another client with whom I regularly converse holds just the opposite view. She cites Trump’s “This [pandemic] is a hoax” comment. She sees Trump as a pathological liar and dismisses his cognitive abilities. She holds him responsible for the sickness and death that she has personally seen in her circle of friends and acquaintances. She is a 100% Biden supporter.

And, of course, we see all shades of views in between these two extremely hardened political positions.

We note that where each of these persons lives becomes critical in an election that is decided by the Electoral College.

As we have written several times, we believe that there is a long road to travel from here to election day. Polls reflect only today’s opinions, driven by the news flow and influences that shape the views of undecided or unsure voters in the key Electoral College states. Lots of guesses are circulating about November. They remain just guesses. And polling data is derived under very difficult conditions, which means that margins of error must be taken into serious consideration. In our view those margins must be widened because of the extreme conditions we now face.

We’ll end by citing a new study that dispassionately analyzes America’s pandemic response to date, makes clear the risks we face, and then proposes a hopeful plan that, the author says, could by October 1 bring the entire nation to a level of containment sufficient to safely open schools and colleges, host sporting events, and return Americans safely to the workplace. (“COVID19 in America: An October Plan,” ScienceDirect, July 23, 2020, https://www.sciencedirect.com/science/article/pii/S1286457920301416)

Please note that this is a source in science/medical community and not Democratic or Republican politics or biased-media reporting.

Here again is the link to the Axios poll: https://www.axios.com/axios-ipsos-poll-gop-skeptics-growing-deaths-e6ad6be5-c78f-43bb-9230-c39a20c8beb5.html.

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