Stocks fell hard on Monday, October 26, 2020, just a week before the election.  The Dow was down 650 points, while the S&P was down nearly 2%.

There were several things attributed to the decline.  There is a question of whether there will be a “stimulus” deal. Interest rates have ticked higher. And there are reports about a spike in coronavirus cases.

It is no surprise the media is playing up that last item.  With just a week until the election, the powers-that-be want to make our lives seem as miserable as possible.

The truth is that nobody really knows what drives stock prices down (or up) on any given day except that buyers and sellers are meeting at a price below what the price had been the day before.

There are a lot of theories out there about what will happen with the stock market based on the election results.  A lot of the pro Trump people think that stocks will tank if Trump loses.  The anti Trump people aren’t necessarily saying that stocks will tank if Trump wins because they would generally rather not talk about the stock market.

I do think Biden had the right response in the last debate when Trump was touting the stock market. Sure, 401k accounts have gone up, but that really doesn’t help most people.  It certainly doesn’t help most people in the short run.  The people on so-called Main Street are more worried about their jobs than their stock portfolio, especially since most of them don’t have a stock portfolio.

Of course, it is the policies that Biden advocates that have caused much of the wreckage, particularly in regard to the lockdowns.

Anyway, I am not sure that the election results are going to matter much one way or another with regard to the stock market.  It could easily crash after the election, but it could just as easily happen over the coming week.

There is more free market rhetoric that comes out the mouths of Republicans.  But when it comes to policy, it doesn’t seem to matter that much.  We still get massive spending, massive debt, and massive monetary inflation.

It might hurt stocks a bit if corporate taxes go back up under Biden.  But Biden hasn’t been talking much about corporate tax rates. He talks more about marginal tax rates on high-income earners.

And even here, little changes have not seemed to matter over the years.  Taxes went up under Bill Clinton, but stocks mostly boomed. Now, part of this was a bubble that eventually popped, but I think most libertarians would agree that we were much better off economically in the 1990s than we are today.  That was the last time there was some fiscal sanity. The Republican-controlled Congress and the Clinton White House seemed to keep each other in check, and we almost had an actual balanced budget.

There is one thing that the stock investors don’t like.  That is uncertainty.  And there is plenty of uncertainty in the year 2020, and there is a lot of uncertainty with regard to the election.

The best short-term result for stock bulls is that there is a landslide either way.

Still, there are problems even here.  If Biden wins easily, there will still be questions about how he will govern. If all of Congress goes to a Democratic majority, I think this could really be seen as a threat for investors.

If Trump wins easily, then you have the threat of rioting and continued attempts by the establishment to make our lives as miserable as possible.  They will want to make sure that those tens of millions of Trump supporters pay a dear price.

Then there is the possibility that the election draws out in a contested legal battle.  What happens if nobody is willing to concede? What happens if there is no end in sight and there is talk of Nancy Pelosi becoming president in January?

This would spook the market more than anything.  There would be great instability.

No matter what happens, I still believe that stocks are in a massive bubble.  I thought it was the end of the bubble in March, but I somehow underestimated the power of massive Fed inflation.  I also underestimated the power of major stimulus and unemployment checks coming from the federal government.

I expect it will be a roller coaster ride from here.  It could be a great benefit for day traders who go in and out of the market quickly.  There will be a lot of volatility.

If Biden wins and stocks go down, don’t count on that becoming a permanent trend.  It’s possible it will just because it would have happened anyway, but uncertainty doesn’t typically last long when it comes to new presidents.

If you remember back to 2016, stock futures tumbled hard when it became evident that Trump was going to win the presidency.  Stocks opened the following day down, but it didn’t last long.  By the end of the week, most people realized that Trump was not going to be bad for stocks, or at least not any worse than a Hillary Clinton presidency would have.

So while I expect extra volatility due to the elections, I don’t expect the presidential election to be a long-term factor.  There are so many variables right now, don’t even bother trying to guess what will happen.  Again, this will only be good for day traders.