The financial markets seem eerily calm before the election.  This is surprising given how volatile the news is about both candidates.  It is almost like we are in the eye of a hurricane, where the sun is out and it is perfectly calm.  We do expect the markets to react after the election in the form of increased volatility.  Whether it is a level 1 hurricane or a level 4+ hurricane remains to be seen.  Either way, this is probably the most emotional election we have ever seen and would not be surprised to see those emotions spill over into the markets after the election.  This is not altogether bad because emotional investing tends to open up investment opportunities.

In preparation for a potentially volatile stock market environment, THOR has structured our clients’ portfolios to be “risk off” as we are underweight equities, overweight alternatives and shorter-term in our fixed income securities.  The alternatives in the portfolios have very little correlation to the equity and/or fixed income markets and should provide stability (they may actually appreciate) in a rocky stock market.  The exposure to alternatives also provides capital to purchase undervalued securities should we get a decrease in the various valuation metrics we track.  Keep in mind that our portfolio allocation is based on a disciplined, fundamental based approach and is not based on emotion.  It is at times like this that sticking to fundamentals is imperative.