James Liu, Clearnomics Founder & CEO, joins Yahoo Finance's Kristin Myers to break down Tuesday's market rally as the 2020 presidental race comes to a close.
KRISTIN MYERS: So James, of course, the election is today. I'm wondering if you think that market uncertainty kind of ends today, or does it really kind of start to begin today, in some ways?
JAMES LIU: Hey, Kristin, good to chat with you. We do think that, you know, hopefully today, if we get results, we'll close one chapter. It will lift some uncertainty. But it's always hard to separate the market reaction in terms of some clarity that we've been desperately seeking in 2020 versus, you know, the actual candidates and policies.
And what we normally tell investors is that, you know, it's really important to vote. But it's better not to vote with your hard earned dollars or with your portfolios. In the long run, it's really these long-term economic trends, for example, the bounceback from the government shutdown, with that 33% GDP number that we saw. It's those things that really affect the stock market over the long run.
So hopefully, we have a lifting of uncertainty. And then we get some clarity around policy. Hopefully, we get some sort of fiscal stimulus measures in the next couple months-- again, depending on the election results. And the stock market can be supported by all of those policy moves in the next six months or 12 months.
KRISTIN MYERS: So James, you're mentioning a lot of hopes out there for the investors and for the market. Let's start with one, which would be clear election results by tomorrow. How much do you think investors right now are really kind of factoring in or baking in a delay in election results or even a long contested election? How nervous do you think they'll get if this election actually drags out for the next several weeks?
JAMES LIU: Yeah, so it's really hard to say. The only precedent we have for this is, of course, back in 2000, with the hanging chads. Markets were down over that period, but the problem with looking at that period is that you also had the tech bubble that was bursting at the same time, which is arguably a much bigger factor during that period.
And then if you also look at the market movements over the last couple of weeks, we've had markets that were down last week, big intraday and daily swings, and the markets that are up today. And so, you know, you take a look at all this, and I think what's been happening is, as the polls have shifted, in this case, toward Biden, you've had a little bit more clarity in the hopes that we would get an immediate results. And of course, as you reported, over 100 million ballots that have already been cast even before today.
So that's possible, but again, you know, nothing's certain at this point still until tonight or, hopefully, tomorrow. You know, 2016, we thought there would be some certainty, and there wasn't. And so it's really hard to say until we actually get the results.
KRISTIN MYERS: So James, I know you've been talking a lot about investors really, you know, hanging their hats, or rather, pinning their hopes on news around stimulus, around a vaccine. Of course, we have no word on either as yet more questions out there than there are answers. If you are an investor that says, you know what? I want to stay at this party right now. How do you protect yourself against some of those risks going forward?
JAMES LIU: Right, we do think that the narrative, especially, you know, in talking about markets, has been that, well, let's wait until a vaccine happens. Once it happens, the economy can open up. We think, you know, that's a problematic view. It's not going to happen immediately. We don't know the timing around a vaccine. And even when it does happen, it's hard to know exactly how it's going to get rolled out. The same with a fiscal stimulus package, like the CARES Act.
I think the key for investors is to look at how the economy has done basically since March. And certainly since the economy started to reopen during the summer, you basically had this recovery that's helped support the stock market even without a vaccine and without a second stimulus package. So those things would be icing on the cake. They would help. But many parts of the economy have been recovering even without them.
Not everything is perfect, obviously. You know, but the fact that the stock market was anticipating that ahead of time means that those who stayed invested and were able to stay disciplined, stick to their asset allocations, they were rewarded for doing so over the last six months.
KRISTIN MYERS: Where are you seeing some of the biggest opportunities in this chaotic and confused market right now?
JAMES LIU: Yeah, so there are a few different places. The first is just the market overall. Yes, valuations are very high. But part of it is that the markets anticipated the economic recovery once the economy started to reopen. So we think that the overall market is still fairly attractive.
And then if you think about areas like value versus growth, growth stocks have absolutely ripped because of the dynamics related to COVID-19 and the shutdown. And so there are a lot of value names out there where, you know, if you're willing to put in some work, you have some investment advisors or portfolio managers that you trust who do the work, you know, I think there's some really attractive opportunities in those areas, too.