A new administration means lots of policy changes, which leaves questions about where the market will head this year. Three market analysts weighed in about the ways investors can navigate these upcoming moves.
Jacob Walthour, co-founder and CEO of Blueprint Capital Advisors, emphasized the success of technology stocks and a renewed focus on climate change:
“I think the Biden administration is handcuffed as it relates to tax reform and we certainly know that Democratic administrations like to spend. So, I think in the foreseeable future, we sort of have the best of both worlds – the Democrats offering more spending, increased stimulus, and the old Republican policy of lower taxes, which I think is net-net bullish for the market. What I do think we’re going to have to do here is not just play the market. We’re going to actually have to find sectors of the market that will continue to do well over the course of the next one to three years. So, it’s going to be a stock pickers’ market. I continue to be very bullish on the tech sector. Let’s take Amazon, for example. Everybody’s using Amazon now to get what they need – businesses, individuals. It’s hard to live without Amazon, and no matter how long this pandemic lasts, Amazon’s going to continue to do well. With respect to Tesla, you can’t really think about it from a valuation perspective. Electronic vehicles is the wave of the future. Governments like Finland and the rest of Europe, China, the U.S. are concerned about global warming and that means that electronic vehicles are going to continue to be in demand.”
Elizabeth Burton, chief investment officer of the Hawaii Employees’ Retirement System, noted it may be time to diversify, looking into emerging markets and Europe:
“In terms of the new administration, I think I’d echo comments from other people that we’re likely to see a lot of pressure on [the] U.S. to move more towards climate change and we’re probably expecting regulation there. Obviously, places like health care and infrastructure are also likely interesting. But I do think that there are some things that we can watch in emerging markets and maybe even Europe and start to get a little bit more excited about. … Fourth quarter of last year we were a little bit overweight equities. That worked out pretty well for us. I think now, we’re thinking about taking some of these gains off the table. Not doing anything crazy, but we’re trying to pare back a little bit. So, we discussed last week putting a little bit more into TIPS. There’s not a lot of stuff in the fixed income world we’re super-conducive on and I’m a little concerned about what fixed income in investors’ portfolios really means anymore, and I’ve had a lot of debate on this internally. So, we’re doing some things at the margins. I think I mentioned last time we moved some money into convertibles. We’re looking at inflation-linked bonds. But if we do see interest rates and inflation start to become an issue, some sectors of the asset-bet market look interesting, financials look interesting, and the reason I brought up Europe earlier, which may have seemed like a strange comment, is a lot of the beta trades there, based on their indices, are more tilted towards quality of value versus tech like here in the U.S.”
Andy Blocker, head of U.S. government affairs at Invesco, highlighted the way the vaccines priority can shape the markets during a new administration:
“As indicated by Biden’s first day after inauguration, he’s focused on unity, he’s focusing on the tone at the top, taking the temperature down. He really wants to create an environment where he’s not putting his opponents in a corner and that he’s always leaving room for his opponents to make a deal, which means you have a better chance of getting Covid-19 relief through and you also have a better chance of working with the different governors, whether they’re Republicans or Democrats, to get this vaccine out to people, which is really the issue for the markets. How fast can you get that vaccine out and deal with the Covid-19 situation? If it’s under a trillion, he can get that. If its over a trillion, that’s where it gets tough and it’s really about what kind of ballgame the Republicans are going to be willing to play and then how much pressure Biden’s going to be getting to hold onto some of the elements of the package that aren’t necessary directly related to Covid-19 like minimum wage and other provisions like that.”