A Noisy Market

A Noisy Market Approaching an Election – October 6, 2020

Over the last several years, the intensity of the news flow and information streams seem to have increased to an absurd level. There are constant updates of “Breaking News” and the media strives to tap into people’s emotions on the positive and negative side.

With that as a backdrop, we are less than a month away from our Presidential election. The mood of the market seems to be that if Biden wins, his tax hikes and policies will crush the markets. And conversely if Trump wins, the markets will rally.

Maybe that is true, but we believe that the most powerful force regarding the markets are the world’s central banks. And given their actions since 2008, including their actions this year, it appears they will do whatever it takes to support markets and asset prices.

Why? We believe that is because the global economy is a debt based economy. And inherent in that kind of an economic system, you need adequate collateral in order to function. Obviously, that collateral are the assets of the world. If those asset prices decline, there can be no more asset backed loans and that would put tremendous pressure on the global economy.

Given that, it is our mindset that the Fed, and all the other central banks in the world, will continue to support asset prices…at almost any cost. Therefore, we believe you need to own assets that can inflate in price…no matter who the President is.

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