How Election Results Impact Stock Markets


What will the election results mean to the stock market?

If history is an accurate guide, “Not Much” is the answer to this question.

Last week we sent our Purposeful Investing (Pi) course subscribers, the November 2020 ENR Asset Management Market Outlook (1).   One key feature was some positive thoughts relating to the outcome of US election.

This issue of the Outlook says:   For investors worried about how the stock market will fare in the event of a divided government, history shows equities tend to rise regardless of which party controls government.

From 1929 through 2019, one party controlled both chambers of Congress and the presidency in 45 of those years.

The S&P 500 Index on average rose 7.45% during those years, according to Dow Jones Market Data.

The index was up 30 times and down 15 times.

In the other 46 years when there was a split government, the index climbed 7.26% on average, rising 29 times, falling 16 times and remaining unchanged once;

According to Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, stocks have performed better under Democrats.

Since 1900, $10,000 invested in the Dow Jones Industrial Average only when Republicans were President would have grown to about $100,000 (4% annualized). The same $10,000 would have grown to nearly $430,000 if it were invested only when Democrats were President (6.1% annualized return).

The Outlook also upgraded Asia and emerging markets to BUY in November because Asian stocks are outperforming the United States by the most in ten years, according to Bloomberg and Rosenberg Research.

pixabay.com

Asia, where markets may be rising more

With the US stock markets exhibiting extreme volatility, we need international alternatives to balance our portfolios.

Once a quarter we send out Purposeful investing subscribers (Pi) a 52 page report prepared by Keppler Asset Management that looks at the value and performance of every emerging stock market in the world.  Here are short excerpts of the emerging markets report for the autumn of 2020.

 The report shows the values of the ten best value emerging markets.

keppler

We can compare these values to the high cost of the US and other overpriced markets.

keppler

Investing in a spread of the top value emerging markets at a price-to-book of 1.31 paid an average dividend of 3.78% compared to 1.63% from US markets.   Pus the price-to-book for  US shares is 3.96 more that three times higher than the average price-to-book for the top value emerging markets.

Plus investors who ignored overseas markets lost out!

Through September 2020, the US market was up  6.8%. The Taiwan market was up +14%, India +12.3.1%, China +12.0%,

After suffering one of their worst quarterly returns for the last thirty years in the first three months of this year, emerging markets equities recovered strongly.

Following double-digit returns in the second quarter, the MSCI Emerging Markets Total Return Index (ND) climbed another  9.6% in US dollars.

Year-to-date, however, the MSCI EM TR Index is, in US dollars down 1.2% in the first nine months.

Among the three regional indices, Asia advanced 10.6%, while Europe, Middle East and Africa (EMEA) gained 2.5% and Latin America was down 0.9%.

Year-to-date, Asia fared best, gaining 8.0% thanks to the good performance of China, while EMEA fell 10.5% and Latin America declined 17.4%.

Thirteen markets advanced last quarter, and also thirteen markets were down. Taiwan (+14%), India (+12.3.1%) and China (+12.0%) had the highest total returns last quarter, while Thailand (-11.9%), Hungary (-10.6%) and the Czech Republic (-8.6%) performed worst.

Year-to-date, however, only three out of the twenty-six markets included in the MSCI EM Index recorded a positive return.

The Top Value Model Portfolio gained 3.0% in US dollars last quarter.

There were no changes in Keppler’s country ratings last quarter. The Top Value Model Portfolio continues to hold ten markets—Brazil, Chile, China, Colombia, the Czech Republic, Korea, Malaysia, Mexico, Russia and Taiwan—at equal weights.

According to Keppler’s analyses, an equally weighted combination of these most attractively valued markets offers the highest expectation of long-term risk-adjusted performance.The table below shows how the Emerging Markets Top Value Model Portfolio compares to selected indices as of the end of September, based on important variables (current numbers for book value, 12-months trailing numbers for the other variables—no forecasts).

keppler

According to Keppler’s analyses, the asset class Emerging Markets Equities is now undervalued by 24% compared with the MSCI World Index of the developed markets.

Moreover, the Emerging Markets Top Value Model Portfolio is undervalued by 28% compared to the MSCI Emerging Markets (Standard) Index, by 45% versus the MSCI World Index and by a whopping 61% compared to the MSCI EM Growth Index.

Therefore, the outlook for superior performance of emerging markets equities in general and the Emerging Markets Top Value Model Portfolio in particular, over the next three to five years, remains very favorable.

Note: Due to liquidity issues and geopolitical risks, Keppler assigns lower than equal weights to smaller markets in the portfolios they advise.

We live in a global economy and to keep our investments balanced with the world, we should keep a continual watch on value in all stock markets and look for international as well as local equity opportunity.

Gary

Add Safety, Profit & Get Paid Double

The next four years will be a period of  low stock growth, especially in the US stock markets.

This is based on an in depth analysis by Keppler Asset Management Company in New York using a huge amount of information that includes every stock in 46 stock markets around the world.  I doubt there are few sources of information that contain so much market data at one time.  Our Purposeful Investing Course subscribers look at this data every month.

Last year’s projections showed that the four years ahead would produce good stock market results.  Then 2020 had such incredible growth in markets that I want to zero in on several important points that relate to the next four years of global stock market performance.

First point: Keppler’s Total Return Projections made since 1994 have been very accurate.

The chart below shows the entire real-time forecasting history for the KAM Equally Weighted World Index, starting at the end of 1993.

keppler

This last quarter the actual KAM Equally Weighted World Index is only 3.4% below the intrinsic value that Keppler forecast in December 2016.

Second Point: Keppler now projects a much lower return over the next three to five years.

This drop in projected results has little to do with politics.  It’s all about value!  Due to such a sharp rise in each major market last quarter, the projection for every national, index or strategy return projection is now down by several percentage points compared to the September 2020 projection quarter-end last year.  The markets shot up so fast they are simply not such good value now.

The current (December 31, 2020) projection is that the KAM Equally Weighted World Index will see a compound annual total return estimate of 2.6% in local currencies.  That projection is way down from the projection of 6.1% just three months ago.

The upper-band estimate implies a compound annual total return of 7.4% (down from 11.1% three months ago), while the lower-band estimate of  indicates a compound annual total return of minus 3.0% (down from positive 0.4% last quarter).

In other words global markets are overheated and won’t see significant growth in the three to five years ahead.

Third point: The US market will see the worst results of all the major markets into 2024.

Keppler’s projections show negative 3-5 year total returns for the MSCI USA Index for the first time since 2000.

keppler

Fourth Point: The Top Value Markets will do best, Asia and Europe will be the best developed markets from now to 2024.

World growth will be stunted by the low US results.  Asia and Europe will catch up with the terrific results in the US over the past 5 years.

The average developed market—as measured by the KAM Equally Weighted World Index—is now under-valued by 29% vs. the cap-weighted MSCI World Index, based on traditional valuation measures..

The Top Value Markets are now undervalued by 39% compared to the MSCI World (Standard) Index and are undervalued 51% compared to the MSCI USA Index.

Keep an eye out for any significant correction in global stock markets.  If so this will be a good time to add to the Pifolio.

The chart below shows the last 26 years of real-time forecasting by the global equity analyst we track to make our portfolio decisions.

More importantly look for markets that pay the highest income now!

Current markets have turned economic history upside down.  Normally bonds pay the highest interest rates and add safety to a portfolio.  Not at this time.

In 2020 many equities paid a higher yield than bonds.

As of February 2021, according to Ycharts.com, (1)  AA bond yields are at 1.57%.

bond yields

The US MSCI Index pays a modest 1.60% as of February 2021 .  That’s a terrible yield, but better than the 1.57% you can get in AA rated corporate bonds.

Just because US stocks pay more than dollar denominated bonds, does not mean they offer the best income deal.  In fact US shares pay one of the lousiest average yields of the 46 stock markets we, via Keppler, monitor around the world.

Eight solid, top value stock markets (shown below) not only add diversification and the best long term profit potential, they pay more than double the average US yield.  They pay  2.89% compared to the US yield of 1.68%.

keppler

This is why my core stock portfolio consists of a handful of top value share ETFs and this position has hardly changed in five years.

Let me explain why this strategy adds safety, increases long term appreciation potential and pays almost double short term income right now.

During the past five years, I have been steadily accumulating the same good value ETFs.  I have traded only five times, so my trading costs, my fuss, fiddle and time spent have been kept to an absolute minimum.

I have been investing in iShare country ETFs.  Each one invests in the MSCI Index of one of the top value markets above.

My strategy protects against stock market volatility and yet has potential for the best gains long term from rising share prices by holding an equally weighted portfolio of the best value based country ETFs.

The Purposeful Investing Course uses Keppler analytics to track 46 stock markets around the world into determine which markets offer the best value.

Since no one knows what the future will bring, investing in value makes the most long term sense.

Plus Value ETFs are Safer

The people who dominate stock markets include a pack of thieves.  This fact has always been true.  We were recently reminded of this fact when Wirecard AG, one of Europe’s most prestigious companies, listed on Germany’s premier stock-market index, the Dax 30 fooled everyone including its top grade, longtime auditor, Ernst & Young GMBH.

The shares in German fintech company Wirecard AG (symbol WDI fell 63.74% as it filed for insolvency proceedings, after revealing that more than $2 billion in cash missing from its balance sheet was all a fraud.  The company’s market value fell to less than €500 million from almost €13 billion in a week.

Investors have seen this type of rip off again and again, really big scams from Enron to Bernie Madoff and these are just the tip of the iceberg.

Shares in stock markets are manipulated all the time.  Stock markets (in fact almost all types of markets) are led by sharks plain and simple.  Count on this fact.  This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.

In the Wirecard AG example many  thousands of investors have seen their hard work, their thrift, their security and hopes for the future disappear, even though they seemingly did everything right by investing in a blue chip, new era, high tech company.

A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.

keppler

Our Purposeful Investing Course (Pi) strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.

Manipulators have a hard time tricking an entire market, especially larger markets.  If you get the best value country ETFs, your chances of long term profits improve.

Pi teaches an an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares.   Investing in an index is like investing in all the major shares of the market.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pi portfolio consists of iShare Country Index ETFs managed by Black Rock, Inc.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.

My developed market portfolio has been diversified into eight developed markets: Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

iShares Country ETFs make it easy to invest in each of the good value markets.

The ETFs provide higher income and incredible diversification for safety, plus the highest long term profit potential.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

There is an iShares country ETF for most stock markets around the world.

Here’s how you can create your own good value strategy.

I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use.  You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets).  This analysis looks at the price to book, price to earnings, average yield and much more of all 46 markets.

This year I will celebrate my 52nd anniversary of global investing and writing about global investing.  Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades.  This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in the Pi course.

Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.

A 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of higher performance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $124.50 off the subscription.

Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report and access to all the updates of the past two years, plus all new updates over the next year.

I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.

If you are not totally happy, simply let me know in the first two months for a full no fuss full refund.

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential. 

Due to the COVID-19 pandemic we have cut the subscription to $174.50.  You save $124.50!

Then because this global recovery from the pandemic is going to take years, we’ll maintain your subscription at just $99 a year rather than $299.  Your subscription will be autorenewed in 2021 at $99, though you can cancel at any time.

Click here to subscribe to Pi at the discounted rate of $174.50

Subscribe to Pi today and you get a year’s subscription to Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, plus begin receiving regular Pifolio updates throughout the year.

Gary

(1) Ycharts.com corporate bond yields