On Tuesday afternoon, just hours ahead of the first presidential debate between President Donald Trump and former Vice President Joe Biden, a panel of asset management experts came together to debate the potential impact of the election on the U.S. and global equity markets.
The virtual roundtable, sponsored by public relations firm JConnelly, also explored the investment opportunities the experts see both in the short- and the long-term.
“What the markets are looking at right now are the stimulus and fiscal policy debates, as well as the replacement of Supreme Court Justice Ruth Bader Ginsburg,” said Troy Gayeski, partner, co-chief investment officer and senior portfolio manager at SkyBridge Capital. “Right now, there is a lot of uncertainty. Up until last week, the markets were expecting another round of fiscal stimulus, but it’s unclear whether this will actually happen.”
Gayeski suggested the battle to replace Ginsburg on the Supreme Court will likely take precedence over the passage of additional stimulus legislation.
“Additional stimulus is now on life support, which explains some of the downside we saw last week,” Gayeski said. “I believe the markets are going to have to grapple with the fact that there will be no more stimulus before the election.”
Frank Rybinski, chief macro strategist at Aegon Asset Management, said the pandemic will likely result in $2 trillion in economic activity being lost this year.
“The longer the stimulus is pushed off, perhaps until next calendar year, the higher the risk that we will suffer long-term negative effects,” Rybinski said. “The longer people are unemployed, the more it outdates their skills for the next opportunity. This also is causing tremendous cuts in R&D [research and development] budgets, which will lower the GDP [gross domestic product] growth trend for the next few years.”
Rybinski said he is hopeful legislators will come together on “a next round of fiscal stimulus so we won’t have too much of a drag.”
Sylvia Jablonski, a managing director focused on the capital markets and institutional exchange-traded fund (ETF) strategies at Direxion, noted that the S&P 500 is down 5% this month, likely due to some short-term traders taking gains off the table. Though she has several concerns, she noted there is continued uncertainty over whether the pandemic will continue to have a stranglehold on the economy.
“Where we sit now is in a period of uncertainty,” Jablonski said. “On the one hand, it feels like COVID has simmered down and a vaccine is close. On the other hand, we are starting to see spikes [of the disease] again. The market is dealing with five uncertainties right now. These are the pandemic, fiscal stimulus, China-U.S. relations, the election and whether the candidates will accept the results of the election and a vaccine.”
Jablonski said that for short-term traders, there will continue to be opportunities to buy on the dip as volatility appears to continue to be on the horizon. “Long-term investors need to think about sectors and how to position their portfolios,” she added.
During Tuesday evening’s presidential debate, retirement plan advisers and investors tuning in are likely to hear personal attacks from each of the candidates, rather than sober debates about important policy issues, said Will Weatherford, managing partner at Weatherford Capital. Thus, he said, nothing either candidate is likely to say will give investors insight into possible market plays.
“Generally speaking, it will be light on detail and heavy on accusatory behavior,” he guessed.
Jablonski said her advice on how to position one’s portfolio between now and the end of the year is “to invest in long-term funds and ignore volatility.” Jablonski said she is very bullish on technology stocks and ETFs, particularly cloud-related, biotech and semiconductor companies.
Gayeski said alternatives, including hedge funds, might be a good investment right now.
“One may use alternatives as a replacement for fixed income,” he suggested.
Rybinski agreed, adding that there are also opportunities in spread fixed-income products.
“That is one area where you have Federal Reserve support, especially in the investment grade space,” Rybinski said.