Portfolio manager raises concerns over healthcare and questions what 'infrastructure' means in 2020
The U.S. election campaign hit fever pitch last week when the two men vying for the White House plumbed the art of debate to new depths. Maybe the less said about that the better. However, this unusual presidential campaign is now in its last month before official polling day and investors are watching for clues.
Grant Bowers, senior vice president and portfolio manager with the Franklin Equity Group, believes both parties will be pushing for an overdue infrastructure spending plan.
He said: “It’s been surprising to us that we haven't been able to push through a major infrastructure plan over these last four years. If you would have asked me back in 2016, I would have said that was one of the number one priorities.
“As we move forward, I still have a lot of confidence that we're going to see an infrastructure plan. And while the different parties may direct it differently, both sides will include a lot of roads and bridges, and they will include airports and infrastructure as they are really the pieces that make [the U.S.] move.”
Bowers added that one of the biggest questions around this sector in the U.S. is what infrastructure actual means in 2020. The days of it being purely bricks and mortar are behind us, he explained.
“Our sense and our research says much of that is going to be spent on technology. Technology infrastructure is really in many ways replacing what we used to think of as infrastructure. So, access to broadband, 5G, wireless infrastructure and data infrastructure is all going to be a big part of any plan.
“Many investors don't think about it this way but we really do think any multi-billion dollar infrastructure plan is going to have a lot of capital that flows to technology, infrastructure and projects.”
While President Donald Trump’s tweets and health may be moving the market right now, for the long-term investor, Bowers said it pays to remember corporate fundamentals and corporate profit. He believes it remains prudent to invest in high-quality businesses that can endure economic volatility and have good balance sheets and strong cash flow.
“When we are active investors navigating the market, we're trying to think about our portfolios, truly, in the sense of one, two, three, five or 10 years and not necessarily about the next one or two quarters. We think that's the recipe for success.
“So we really do encourage investors to think long term and use any of the volatility we might get around the election as an opportunity to take advantage of good prices on great companies that are going to be around for a long time.”
Bowers did raise concerns about a Democrat win with regards to healthcare. Candidate Joe Biden wants to expand coverage and increase consumers' ability to get access. His new plan includes a "Medicare-like" public option, while Americans would also be able to choose their own private insurance, requiring a lower income rate to obtain it. Bowers said markets remain fearful that we could see a true public takeover of healthcare.
He said: “We see that as a very remote possibility out there, but it's something the market is going to continue to be very concerned about in the future. Another big topic in healthcare that we're always paying attention to is drug price regulation and it will be a big topic within healthcare as we come into the election and even post the election.
“It could have tremendous impact on pharmaceutical as well as biotech sectors. Right now, we don't see anything that is that alarming. But it's something we're really going to be monitoring closely because the impact could be quite severe if we saw a true change in the way drugs are priced and sold in the United States.”
