FINSUM + Magnifi: Wall Street Warns of Big S&P 500 Drop if Biden Wins
(October 2020)
Wall Street has been all over the place in its prognostications for this election. The clear market trend over the last few weeks has been higher alongside gains in the polls by Biden. Some think a Biden win would be good for markets, but today a Wall Street strategist, David Kalayjian, is warning of a 5% drop in the S&P 500 if Biden emerges victorious. “A lot of people are worried because they don't have the details of the Democrats policies. So, the potential blue wave causes uncertainty and will be negative for the markets for a long time”, says Kalayjian.
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FINSUM + Magnifi: These Stocks Benefit No Matter Who Wins the Election
(October 2020)
The election is well and truly underway, with tens of millions of early votes already cast. That has not made the outcome any clearer though and there is a still a lot of uncertainty about who will win. As this relates to client portfolios then, one good idea is to pick stocks that seem poised to benefit in any outcome. Interestingly, the stocks that seem most likely to benefit in either situation are budget consumer-facing companies—think McDonalds, Dollar General and beyond. None of them are regulatory targets, and many seem likely to benefit from additional stimulus the government seems likely to offer. Likewise, infrastructure funds appear as though they will gain because either party will probably pass a new infrastructure bill.
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FINSUM + Magnifi: Look Out for a US Economic Stall
(October 2020)
The outlook for US economic performance took a significant hit this week. That hit was when President Trump called off further negotiations about a stimulus bill until after the election. That means the odds for more stimulus dollars to land in consumer bank accounts in the next couple months plummeted. Oxford Economics argues that with the recent expiration of Trump’s extra payments that he created via executive order, there is going to be an income “cliff” for most Americans. “Without faster job growth — unlikely at this stage of the recovery — or increased fiscal aid, households, businesses and state and local governments will be increasingly susceptible to a deterioration of the health situation”, says Oxford Economics, adding that it may mean the US enters “stall speed”.
FINSUM + Magnifi: The China Situation Will Grow More Tense, and Not Because of Trump
(October 2020)
President Trump has been very critical of China and the US’ relationship to Beijing over the last four years. He has almost single-handedly driven a tense trade war between the two countries. However, following almost four years of escalating stand-offs, something odd is happening—policy experts say that a Biden victory might actually make the US-China relationship even worse than it is with Trump. According to the top Asia official from the Obama years, “I think there is a broad recognition in the Democratic Party that Trump was largely accurate in diagnosing China’s predatory practices”. And according to a former Chinese trade negotiator, “If Biden is elected, I think this could be more dangerous for China, because he will work with allies to target China, whereas Trump is destroying U.S. alliances”. To that point, another commentator, a Chinese policy expert at Renmin University in Beijing says “Biden would make the hard lines more effective and more efficient”.
FINSUM + Magnifi: The Best Funds for the Election
(October 2020)
Investors have a great deal of consternation about the election. Not only does the outcome offer two very different realities, but the odds of a hotly contested election are high, with a potentially brutal effect on market prices because of the long period of uncertainty that would ensue. With that in mind, here are some ideas for how to play the election. In a Democratic sweep, where higher taxes seem likely, big stocks might face some headwinds. However, consumers would probably receive some extra stimulus, which means spending would be better. In this scenario, look at McDonalds, Target, Dollar General, and Nike. If the election is split, with a Democratic president and a split Congress, that would likely mean a slower recovery and less spending, so think about Walmart, Dollar Tree, and Home Depot. Finally, in a Republican sweep, most things would stay the same as now, and Best Buy, Walmart, Dollar General, and LuluLemon could do well.
FINSUM + Magnifi: Why the Election Means the New DOL Rule Is Dead
(October 2020)
For much of the year, the wealth management industry has been concerned about the fiduciary rule. While it is not as onerous as the first version of the rule, it is universally disliked—those who are against a fiduciary concept for brokers dislike it, but so do those who want a uniform fiduciary rule. Well, everybody is likely to be happy then as it is appearing increasingly uncertain whether the new DOL rule will ever come into force. The reason why is simple—the DOL has probably run out of time. According to partner Bradford Campbell at industry-leading law firm Faegre Drinker Biddle & Reath, there just isn’t enough time to do the full rewrite of the rule that the DOL needs to accomplish before the effective November 1st deadline. November 1st is essentially the safe date for the rule, as it needs to be on the books before then to have a good chance of becoming permanent. Speaking about the possibility of Biden becoming president and overturning the rule, “Basically speaking, if a rule has been on the books for more than 60 days, to displace it, you have to do new notice and comment rulemaking," says Campbell.
FINSUM + Magnifi: Goldman Warns the Election is a Big Lose-Lose for Stocks
(October 2020)
Goldman Sachs is worried about the election. In particular, they are concerned about what a contested outcome could mean for stock prices. Because of that they think the debates, which started this week, have the potential to be an “important catalyst for investors to assess risks”. The debates have the possibility of swinging the election strongly one way or the other, which means they can be tipping points for investors. “One way to lower the odds of a contested outcome (that brings noise and volatility) is via a large margin of victory that cannot be undermined”. That said, according to the bank’s strategists, even a big win could have risks: “Although undoubtedly under the clean-sweep scenario there is the negative implications for risk assets to be considered, stemming from a Democratic legislative agenda including higher corporate taxes and increased capital-gains taxes”.
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FINSUM + Magnifi: DOL Plan to Ban ESG from 401(k)s Gets Attacked by Industry
(September 2020)
Anyone who invests significantly in ESG will already be aware: the DOL is going after the ESG sector and has a proposal making progress that would bar the inclusion of ESG funds in 401(k)s. The push—which the DOL seems very committed to—comes despite the fact that almost everyone in the wealth and asset management spaces says there is no real problem. The DOL is making the rule because it fears that ESG funds could be against a client’s long-term economic interests. However, according to BlackRock, over the last ten years “94% of sustainable indexes outperformed traditional indexes”. BlackRock and Fidelity have both come out publicly against the rule, with the latter publishing an 11-page letter to the DOL which said the rule was not “well grounded or supported by much of the emerging data”.
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FINSUM + Magnifi: Why Reg BI Will Get Scrapped Within a Year
(September 2020)
Make no mistake about it. If you were to make odds on whether Reg BI will still be in place one year from today, most would put the chance at less than 50%. That is a pretty dramatic reality for the SEC’s centerpiece legislation of the last half decade. The reason why is that the Democratic party and Joe Biden have made it very clear that they want to pursue a more robust fiduciary standard, and they are currently ahead in the polls. If Biden wins the election, they have many avenues to do this, such as by replacing the head of the SEC, or by passing legislation that alters the Dodd-Frank Act to require a true fiduciary component.
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