After the Vote: What Comes Next?
- Keywords:
- covid-19
- u.s. election
Early U.S. Election Results: What We Know
With U.S. presidential election results still hanging in the balance, BMO Capital Markets hosted a client call to discuss investment strategy based on what we know so far. The call, hosted by BMO Capital Markets Chief Investment Strategist Brian Belski, also featured expert commentary from Margaret Kerins, Managing Director and Head of FICC Macro Strategy, and Michael Gregory, Deputy Chief Economist and Head of U.S. Economics.
Our experts urged caution around premature investment decisions ahead of final results, and instead focused on what we do know, like the likelihood of a gridlocked Congress and what that will mean for stimulus, future leadership of the Fed, and the importance of equity markets to overall portfolios.
Listen to the full conversation here, or read the content below that describes what is in the podcast.
Focus on Growth
At the top of the call, Brian Belski urged listeners to trust the process and turn off the rhetoric until each state certifies the election.
“We think it's way too early to make any kind of rash portfolio decisions in both Canada and in the United States,” he said. “This has been an emotional year that has impacted all of our lives, from a personal level to an investment level. And we have to continue to control what we can control.”
From an investment standpoint, Belski recommended a fundamental strategy to buy scarcity and sell capacity, focusing on growth.
“So, what does that mean? From a scarcity proposal, we want to buy quality assets, where we know the businesses,” he said, advising investors to focus on the three different categories of growth: secular, structural and cyclical. “It’s bottoms-up fundamentals that matter again. We want to focus on growth (because) when growth is scarce, growth outperforms.”
In the United States, Belski said BMO Capital Markets remains overweight in technology stocks, communication services stocks and consumer discretionary stocks, as well as parts of staple retailing, parts of financial, and select healthcare companies. In Canada, he said his team is overweight in communication services and financials.
Belski ended his commentary by calling for investors to focus on the positive, and reiterated his forecast of a U.S. equities market still in the midst of a 20-year bull market.
“We continue to believe that equities in the United States and Canada are the best home for assets with respect to equity assets in the world,” he said.
Skinny Stimulus Bill
BMO Capital Markets Deputy Chief Economist Michael Gregory also advised caution around strategy until we have clear data on who the next president will be. What we can speculate about, he said, was on the impact of a likely divided Congress and implications for future fiscal stimulus.
“It looks like we are headed toward a divided Congress and therefore a situation where it may be difficult to get the kind of fiscal stimulus bill that was envisioned in a blue wave scenario,” Gregory said, predicting a “skinny bill”, regardless of who ends up winning the presidency.
He said that because of the change in the monetary policy framework, the Fed’s future policy should turn out to be “very politician friendly”, and “we all know that it looks like we probably won't get rate hikes by the Fed till maybe 2024 at the earliest.”
Gregory said the key economic focus remains on COVID-19 and rising infection rates on both sides of the border and the impact on reopening plans.
On the tax front, we also know that whoever wins the presidency will have to deal with a growing national debt, which will impact both tax and spending policies over the medium- to long-term.
Near-term Volatility
BMO Managing Director and Head of FICC Macro Strategy Margaret Kerins noted that the fight against the pandemic and search for a vaccine will continue to weigh on markets, although a sizable fiscal stimulus package will be unlikely with a divided Congress, even in the case of a Biden win.
“If Biden does win, we do think the prospects for a sizable fiscal deal are certainly dwindling, and this is being priced into the Treasury market,” she said, saying the fight against the pandemic will still weigh on either president and decisions around stimulus. “I think a small package is still possible … given the rising infection rates, which are reversing the reopening effort.”
Noting near-term volatility in market pricing overnight and into Wednesday amid classic short-covering behaviour, she said her team maintains its call for 10-year yields approaching the 1 percent level.
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Brian Belski
Chief Investment Strategist
Brian is the Chief Investment Strategist and leader of the Investment Strategy Group, provides strategic investment and portfolio management advice to both institut…(..)
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Michael Gregory, CFA
Deputy Chief Economist & Managing Director
Michael is part of the team responsible for forecasting and analyzing the North American economy and financial markets. He has spent his career working in either ec…(..)
View Full Profile >Early U.S. Election Results: What We Know
With U.S. presidential election results still hanging in the balance, BMO Capital Markets hosted a client call to discuss investment strategy based on what we know so far. The call, hosted by BMO Capital Markets Chief Investment Strategist Brian Belski, also featured expert commentary from Margaret Kerins, Managing Director and Head of FICC Macro Strategy, and Michael Gregory, Deputy Chief Economist and Head of U.S. Economics.
Our experts urged caution around premature investment decisions ahead of final results, and instead focused on what we do know, like the likelihood of a gridlocked Congress and what that will mean for stimulus, future leadership of the Fed, and the importance of equity markets to overall portfolios.
Listen to the full conversation here, or read the content below that describes what is in the podcast.
Focus on Growth
At the top of the call, Brian Belski urged listeners to trust the process and turn off the rhetoric until each state certifies the election.
“We think it's way too early to make any kind of rash portfolio decisions in both Canada and in the United States,” he said. “This has been an emotional year that has impacted all of our lives, from a personal level to an investment level. And we have to continue to control what we can control.”
From an investment standpoint, Belski recommended a fundamental strategy to buy scarcity and sell capacity, focusing on growth.
“So, what does that mean? From a scarcity proposal, we want to buy quality assets, where we know the businesses,” he said, advising investors to focus on the three different categories of growth: secular, structural and cyclical. “It’s bottoms-up fundamentals that matter again. We want to focus on growth (because) when growth is scarce, growth outperforms.”
In the United States, Belski said BMO Capital Markets remains overweight in technology stocks, communication services stocks and consumer discretionary stocks, as well as parts of staple retailing, parts of financial, and select healthcare companies. In Canada, he said his team is overweight in communication services and financials.
Belski ended his commentary by calling for investors to focus on the positive, and reiterated his forecast of a U.S. equities market still in the midst of a 20-year bull market.
“We continue to believe that equities in the United States and Canada are the best home for assets with respect to equity assets in the world,” he said.
Skinny Stimulus Bill
BMO Capital Markets Deputy Chief Economist Michael Gregory also advised caution around strategy until we have clear data on who the next president will be. What we can speculate about, he said, was on the impact of a likely divided Congress and implications for future fiscal stimulus.
“It looks like we are headed toward a divided Congress and therefore a situation where it may be difficult to get the kind of fiscal stimulus bill that was envisioned in a blue wave scenario,” Gregory said, predicting a “skinny bill”, regardless of who ends up winning the presidency.
He said that because of the change in the monetary policy framework, the Fed’s future policy should turn out to be “very politician friendly”, and “we all know that it looks like we probably won't get rate hikes by the Fed till maybe 2024 at the earliest.”
Gregory said the key economic focus remains on COVID-19 and rising infection rates on both sides of the border and the impact on reopening plans.
On the tax front, we also know that whoever wins the presidency will have to deal with a growing national debt, which will impact both tax and spending policies over the medium- to long-term.
Near-term Volatility
BMO Managing Director and Head of FICC Macro Strategy Margaret Kerins noted that the fight against the pandemic and search for a vaccine will continue to weigh on markets, although a sizable fiscal stimulus package will be unlikely with a divided Congress, even in the case of a Biden win.
“If Biden does win, we do think the prospects for a sizable fiscal deal are certainly dwindling, and this is being priced into the Treasury market,” she said, saying the fight against the pandemic will still weigh on either president and decisions around stimulus. “I think a small package is still possible … given the rising infection rates, which are reversing the reopening effort.”
Noting near-term volatility in market pricing overnight and into Wednesday amid classic short-covering behaviour, she said her team maintains its call for 10-year yields approaching the 1 percent level.
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