CIO expects Biden win and, after a market dip, better long-term growth prospects
A “blue wave” in the U.S. will help investors and raise the probability of a $2 trillion fiscal stimulus package, according to one CIO.
While it’s often assumed that a Republican win, and in particular one led by President Donald Trump, will be a boost for markets, these are unique times.
Jon Maier, of Global X, told WP the general view right now is that a Joe Biden win will help the economy and, in time, the stock market. While acknowledging there has been a lot of October surprises in the past, the polls indicate that the Democrat leader has a big advantage. However, a Biden win alone doesn’t mean as much unless his party also takes control of the Senate and retains the House.
Maier said: “Longer-term spending measures such as infrastructure, health care, education, and things related to the protection of the climate, they would all boost economic growth prospects. [A Democrat] win would be a positive.
“If Biden does take control and then the Senate is in the hands of Democrats, I think there's a better shot of more federal response to the coronavirus.”
This means sectors that have struggled, like hotels, restaurants and airlines, will have a better shot at recovery if there is a more “cohesive response” to controlling the virus, Maier added. And while a blue win would likely hit the stock market in the short term, with corporate tax likely to be swiftly raised, the longer-term spending plans would spur a lot of industries and put the economy on better footing. A less-politicised vaccine, of course, would also got a long way to getting people back to some degree of normal.
Maier said: “The markets will always march on. We’re in a situation where parts of the economy have been reopening and we've experienced somewhat of a V-shaped recovery in goods and consumption. Certain sectors of the economy have not done particularly well because we're still not operating at full capacity because we can't, and what we're waiting for is a fiscal stimulus package that will certainty come at some point, I just don't know in what magnitude.
“That will certainly help fill the gaps in terms of those who are still unemployed, because a certain portion of the economy just can't reopen at the moment. But with change comes opportunity, and there's always things that are going to adjust based on what happened.”
So where should investors be looking? Many sectors have emerged as crucial to keeping us going through the pandemic, from cloud computing and cybersecurity to eSports, Netflix and e-commerce.
Maier said: “If you think about how you order food or how get your groceries in a big city, prior to COVID maybe you got them deliver, now you probably do get them delivered. That behavior is going to continue past the reopening.”
Rob Tetrault is a Senior Vice President, Branch Manager and Portfolio Manager at Canaccord Genuity Wealth Management. His views, including any recommendations, expressed in this article are his own only, and are not necessarily those of Canaccord Genuity Corp.
