Post-Election Outlook: Planning for an Uncertain Future

Signal or Noise Quarterly Newsletter | Q3 2016

By Mark Okada, Co-founder & Chief Investment Officer | November 2016

Investor uncertainty has been unusually high this year as investors, faced with all kinds of unknowns from the joyless bull market to the presence of negative interest rates around the world, are unsure what to do with their capital.

This is evident in the amount of cash that’s been accumulating this year. Individual investors made allocations to cash more than any other asset in 2016, and fund managers’ cash levels are at 15-year highs.

The good news is that there is a major event on the horizon that will serve as a catalyst in reducing this high investor uncertainty.

Uncertainty, measured by the percentage of neutral readings in the AAII Investor Sentiment Survey, will come down following the U.S. election. And it doesn’t matter who wins, the mere fact that we know the next president is enough to have a material impact. While it’s unclear if those uncertain investors will become bulls or bears, the election will help inform outlooks and market participants will begin to put capital to work to express those views.

With all the cash that’s on the sidelines right now, the multi-billion-dollar question is: where does all that cash go?

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