We just had an election and things are a bit confusing. The current president isn’t ceding power to the president-elect and the Senate has two contested seats in Georgia which, until resolved, leaves the Senate balance of power up in the air.
While things are no more uncertain in life than they always are, we are more tangibly confronted with uncertainty. So let’s look at what is happening and come up with a game plan.
John Boyd was one of the greatest military strategists of all time, and his method of dealing with uncertainty was the OODA Loop — Observe, Orient, Decide, Act. Try applying this concept to where we currently stand.
First, let’s observe what is happening. By consensus, Joe Biden will be our next president. There is legal wrangling going on that could affect the outcome, so one way to handle this is to determine what you think the chance of the success of these lawsuits will have on the outcome of the election. Try to do this objectively, rather than through the lens of what you want to happen. In my opinion, the probability of Biden being president is overwhelming.
Now look at the Senate. If the Democrats win both Georgia seats, then Vice President-elect Kamala Harris would hold the tiebreaking vote.
But what is the probability of the Democrats winning both contested seats? There are a number of potential outcomes. There are more registered Democrats in Georgia than there ever have been, but Zell Miller was the last statewide Democrat elected there, and that was in the mid-90s. There is a chance that voters could split their tickets and vote for a Democrat and a Republican. We also know that incumbents tend to have a significant electoral advantage and the incumbents are both Republican. To me, the probability is slightly in favor of the Republicans holding on to the Senate.
Now let’s orient ourselves. One way to do this is by looking at what Biden said he would do when he campaigned, and try to understand where his priorities will lie. There were many things he talked about: taxes, the environment, the virus, health care, our world standing.
Again, given how he has acted, I believe his highest priorities are going to be the virus and its impact — containing it, creating a stimulus plan for the numerous job losses and business closings resulting from this containment plan, and ensuring that there is adequate access to health care. He has also made it clear that he wants to govern for all the people, not only for those who voted for him.
This means that not only will he be forced to structure a Cabinet that is generally palatable to the Republicans, he is inclined to do so. It also means that he will need buy-in from the other party as they craft a stimulus plan.
While many conservatives are concerned about his proposal to raise taxes, it seems unlikely that there can be much first-year traction there. Biden’s personal focus will have to be domestic, so he will delegate much of the international work to his secretary of state.
And while he will want to be seen as an environmental president, his first-year environmental impact will be through executive orders rather than attempting legislation.
We also know that the Federal Reserve is clamoring for more stimulus and that it wants to do everything it can to hold interest rates low and facilitate an economic recovery.
While some people are focused on the deficit and concerned about how it may create inflation, policymakers will not pay attention to either.
So what do you need to decide? Decide how much risk you are willing to take regarding how you want to live and where you want to live. Create congruity between your spending and giving and your values.
What are the things on which you need to act? Interest rates are going to stay low, so utilize debt to your advantage. If you haven’t refinanced yet, do so.
If you are contemplating selling some investments for purchases, consider using a small amount of margin (loans against your investments) instead, and don’t hold more in cash than you need to for emergencies.
While the stock market is certainly not cheap, if you don’t need the money for at least three years and your job is secure, you may be better owning a mutual fund or stocks that pay consistent dividends than keeping money sitting idly in a money market.
Be prepared for the health care marketplace to again change and get help in deciding what your best options are. And use the OODA Loop to stay in front of change.
Ross Levin is the chief executive & founder of Accredited Investors Wealth Management in Edina.