Investors have been paying close attention to news out of Washington that might signal the coming of more stimulus legislation before the election. While their optimism has helped buoy the stock market rally, remarks from Treasury Secretary Steven Mnuchin sent the Dow, S&P 500, and Nasdaq shedding recent gains on Wednesday.
During the Milken Institute Conference, Mnuchin candidly stated, “At this point getting something done before the election and executing on that would be difficult just given where we are and the level of detail, but we’re going to try to continue to work through these issues.”
According to Thomas Hayes, the chairman at Great Hill Capital LLC, this could be trouble for the economy, particularly during the upcoming holiday season.
“The market is a little worried about not having that extra support for the next couple of months into the holidays,” Hayes said. “This was viewed as a bridge to a full therapeutic or a vaccine (but) everything is getting delayed and without the stimulus, there’s not that short-term bridge that we needed to get to the vaccine, to get us to the finish line.”
With President Trump calling off negotiations until after the election, more investors weigh the prospect of a generous stimulus during a Biden presidency. Although the former Vice President has pledged to raise taxes for the wealthiest Americans and corporations, participants are taking other considerations into account, like fewer trade conflicts.
“It smacks of opportunism when markets were saying just a few months ago stocks would crash if Trump would lose and now they say Biden victory would be good for stocks,” Norihiro Fujito, Mitsubishi UFJ Morgan Stanley Securities’ chief investment strategist, told Reuters. “What this suggests is that markets are flush with cash after massive monetary easings by global central banks.”
The coronavirus pandemic, historic unemployment, and a contentious election year have given market participants a run for their money. Many hope that a Biden presidency could ease some of the market turmoil.
Even portfolio advisors have had a difficult time keeping up with the volatility. “This has been a roller coaster of a year for sure,” Liz Weikes, JPMorgan Securities’ managing director and financial advisor, told Yahoo Finance’s The First Trade.
“I have clients that are all over the country. So really the pandemic has affected their portfolios in so many different ways. “Clients that have had wealth in pockets of the country, whether it be Missouri, Wisconsin, Texas, all over, it really has affected them differently in their overall businesses,” she continued.
Election years have historically been times of volatility, but this year, the risk is exceptionally high. Weikes added, “In terms of preparing the portfolios, we’ve certainly seen a shift from equities, more into the fixed-income markets, and we are certainly raising cash across all of our client portfolios.”
She explained that a Democratic sweep of the White House and both chambers of Congress — and subsequently, the possibility of revised tax policy — is a conversation that’s “happening all day, every day from morning, until night with all clients. It’s something that we have to prepare for.”
Weikes said, “Even if it is a Biden presidency, I truly believe that there’s so much at stake right now in terms of fixing this country. I don’t know that taxes are going to be the first thing on the agenda, but it is something that we are certainly concerned about.”
She told reporters that her highest-income clients are focusing particularly hard on estate planning right now. “The clients are really focused from an estate standpoint—putting estates in place because not only from a health care perspective, but from the standpoint of what this future presidency could mean for their overall estate and inheritance for their family,” she said.
- Ferré, Ines. “A Blue Wave ‘Is Something We Have to Prepare for’: Financial Adviser.” Yahoo! Finance, Yahoo!, 14 Oct. 2020, finance.yahoo.com/news/a-blue-wave-is-something-we-have-to-prepare-for-financial-adviser-185035545.html.
- Sano, Hideyuki. “GLOBAL MARKETS-Global Shares Slip on Pandemic Surge, Failing Stimulus Hopes.” Reuters, Thomson Reuters, 15 Oct. 2020, www.reuters.com/article/idUSL4N2H60XJ.
- Singh, Medha, and Shivani Kumaresan. “US STOCKS-Wall St Slides as Mnuchin Says Stimulus Difficult before Election.” Reuters, Thomson Reuters, 14 Oct. 2020, www.reuters.com/article/idUSL4N2H53KO.