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Possible pullback into elections could be good buying opportunity: Strategist

Don’t expect “ginormous” volatility moves in the markets going into the elections, says Paul Schatz, president of Heritage Capital. And if there is a sell-off this week, expect the opposite move to follow that.

“Whatever move we get this week, whether it's a peak or a valley, the opposite will happen into the election, Schatz told Yahoo Finance’s On The Move.

“But I certainly don't think we're on the precipice of some ginormous move into that interesting day of November 3rd,” he added.

“If you look at elections by whether an incumbent can run or not incumbent election, Septembers and Octobers are not volatile affairs, you get single digit moves—mid-single digits at best,” said Schatz.

Early voter Kathleen Monokandilios, of Palm Harbor, holds her ballot while waiting in line to enter the early voting location at The Centre of Palm Harbor, 1500 16th St., during early voting on Monday, Oct. 19, 2020, in Palm Harbor, Fla. Early voting is available in Pinellas County, Oct. 19 through Nov. 1, 2020 from 7:00 a.m. to 7:00 p.m., daily. (Douglas R. Clifford/Tampa Bay Times via AP)

‘A good buying opportunity’

“If we get a pullback into Election Day, if we get some quick elevator shaft decline because we don't know who the president is on November 3rd or 4th, I would say pretty confidently, that's a good buying opportunity into the New Year,” said Schatz.

However, he’s not worried about a contested election or results having to go all the way to the Supreme Court.

“The market is not stupid. The market is a pretty good discounting mechanism. and the market usually prices in all different kinds of scenarios,” he said.

Schatz points to 1980 when Republican Ronald Reagan was elected and 2008 when Democrat Barack Obama won as ideal times “having a tide turn” because of the challenges and struggles going into the election.

Whomever is the winner this year, Schatz sees near-term opportunities. A Biden and Democrat win could mean spending of around $2.5 trillion, giving a boost to the first half of next year.

“If Trump or the Senate stays red, you're not going to have these proposed massive tax increases,” said Schatz. “So I would say there's a lot of good scenarios in the short term, meaning Q1, Q2 of next year.”

His comments come on the same day the Dow (DJI) ended the session down 420 points following a deadline from House Speaker Nancy Pelosi for a stimulus deal prior to the elections.

Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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