Megan Horneman of Verdence Capital Advisors joins Yahoo Finance to break down today’s market action.
- Let's talk once again about what's going on in the markets here today. We've seen a rally over the past couple of sessions going into this election. And Megan Horneman is with us now. She's Director of Portfolio Strategy at Verdence Capital Advisors.
Megan, we're trying to sort of game out all of the outcomes here. And I know one of the outcomes you're potentially looking at is one that could actually push back stimulus. I mean, it seems like the conventional wisdom here is that, no matter who wins this election, stimulus is gonna come soon thereafter. Is there any reason it would not?
MEGAN HORNEMAN: Yes, I think that that's what we need to get done, regardless of who wins today or tomorrow, whatever results we end up getting. Stimulus is the most important thing that we get, either by the end of this year or the beginning of next year. The only concern that we have is if this just drags on, if we have a contested election that drags on in the courts, and this, then, takes away from the stimulus probability, and stimulus gets put in the back seat.
- And so what kind of likelihood are you-- I mean, it seems like that would be sort of the unlikeliest scenario here. So what are you sort of pricing into your models here in terms of the outcome, both of tonight but also of the Senate and House?
MEGAN HORNEMAN: So it's a tight race. I mean, I'm not gonna lie. I'm not gonna try to make a prediction on polls that have been misleading in the past. But what I will say is that we're looking forward beyond this election-- I think, so is the market.
You can see that by the past couple days with the rally that we've seen. Getting the election day over with, that's just one more uncertainty out of the way. Now, we just have to see how long it may drag on with the count-in ballots and things of that nature.
But at the end of the day, we will have a president come January 20. And at the end of the day, we do know that we will get fiscal stimulus. It's just the timing of it that we don't know when that will be.
We're hoping to have it sooner than later. And we're hoping that it doesn't get drawn out by whether it be a contested election and the court systems having to get in the way, but we know we will get it. We will get a fiscal stimulus package.
- Megan, handicap this for us. If we do get a contested election, what happens to markets?
MEGAN HORNEMAN: I think the markets have priced in the fact that we're not gonna have an answer tonight. How long that goes on, I think the markets are giving some flexibility, and I think we're seeing that with the rally we've gotten in the past couple of days. Where it really might start to get dicey is if we get further into December and where we get some more of the legal disputes, where then there may be-- that may test sentiment, especially as we're getting to the end of this year, especially if we don't have a stimulus package at that point, too.
- So Megan, put it all together for us. What are you doing in the market based on all of these varying outcomes that could potentially happen?
MEGAN HORNEMAN: So we've had a very modest overweight to US equities. We've kept to a pretty healthy cash position as well in our accounts in order to be able to take advantage of any type of volatility that we may see after the election or even in December of this year because, at the end of the day, this is about the economic fundamentals. And with an additional stimulus package, we think that can take us through this hard winter that we're approaching.
Some of the other areas that we've looked at have been, for example, in the international markets. Even though they're struggling right now with a surge in virus cases as well as lockdowns, they have a lot of the less short-term volatility than we may expect here in the US. And from a valuation perspective, they're much more attractive.
So once they can get past this coronavirus surge and get past these lockdowns, the decline that we saw in October in some of these international markets makes them look attractive.
- Yes, it's tough to find bargains here in the United States these days, at least bargains that people want. Megan Horneman, thank you so much, Director of Portfolio Strategy at Verdence Capital Advisors.