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Key component to resurgence in employment will be a vaccine: Expert

Private payroll gains totaled 428,000 in August, coming in at less than half consensus economist estimates for 1 million, according to Bloomberg-compiled data. Tigress Financial Partners Chief Investment Officer Ivan Feinseth joins Yahoo Finance’s Kristin Myers to discuss.

Video Transcript

KRISTIN MYERS: Now let's chat more about what we're seeing in the markets today after that ADP report. We are joined now by Ivan Feinseth, chief investment officer at Tigress Financial Partners. Ivan, so again, we got that ADP report, sharply missed expectations. We also got the ISM Manufacturing report just the other day that also showed that employment was lagging. I'm worried-- or rather, I-- I want to know if you are worried or have concerns that the economy might be struggling a little more than we think.

IVAN FEINSETH: Well, it is concerning because the-- the key to the economic recovery is a recovery in employment. I mean, that's what was-- has been hurt the most. Employment was hurt the most by the pandemic. I mean, Powell stepped in pumping a ton of liquidity beginning in March to prop up the financial markets, and the PPP has helped companies hold off even firing or laying off more people.

But the concern is this K-shaped recovery, where we've had an increase in stocks, an increase in real estate, and still employment lags. We need a turn in employment. Now, the market is up because it's forward looking. And I think-- well, the key component to the resurgence in employment is going to be a vaccine, and there are three partnerships that are entering into phase 3 trials in October.

So there is optimism we could have a vaccine as early as the end of this year, being mass produced by the beginning of next year, and that's the game changer. So we need a resurgence in employment and the fact that the market's not really paying attention. It's up on a day when that would have been a bad piece of news that would have caused a sell-off because the hope is that going into the end of the year, we should see a pickup in employment and accelerate next year.

KRISTIN MYERS: Now just in the last hour, our own reporter Emily McCormick highlighted that the ADP report really hasn't been a great indicator of the upcoming jobs report that's coming this Friday. But that said, are you at all concerned that we might be getting some bad news on Friday, especially considering that we so-- so widely missed expectations today in this report?

IVAN FEINSETH: It is-- could be a big catalyst. Also, August is a quiet month, and the pandemic has made this, you know, an, like, overly used unprecedented time. So I-- I don't know that it would also be an important-- it's an important indicator, but I don't believe it will have a big impact. We need to see what's going on going forward. This is a normally low volume quiet time with an upward bias in the market, and we are seeing that.

I think things really start to happen when everybody comes back from-- when the Congress comes back from their August recess and the election campaign picks up into full swing next week. That's when things will really become more in focus, and I think we're going to see a lot more volatility. I do believe the market ends higher than it is today. I think easily north of 3,600 on the S&P.

But the key thing will be a pickup in employment that will have followed the strong stock market gains, and the stock market is predicting we are going to see that. Because again, the stock market is forward looking in most cases. So employment will become the key. I don't really think that yesterday's-- or sorry, today's ADP report or Friday's employment report for October-- excuse me, for August will be that meaningful.

KRISTIN MYERS: No worries. I mean, honestly, I don't even know what day it is, so it could be October for all I know. I want to ask you--

IVAN FEINSETH: --To-- to which time to go past, but I think everybody would love to get to the end of this year and embrace 2021 as a new beginning with a vaccine and this pandemic behind us and be back on track to where we were at-- at the end of 2019. With-- 2020, for all intents and purposes, was going to be a record year for many industries, and the pandemic, it just decimated things. So maybe this is the one year we just would like to overcome and forget and hope 2021 will be significantly better.

KRISTIN MYERS: Well, while we wait for 2021, back in 2020, I want to ask you, you mentioned PPP, employment being critical going forward to the recovery. But I want to ask you about the stimulus package because I keep on, at the beginning of every show it seems, just saying, stimulus, we've got no deal. There's nothing happening.

Now, the markets seem to have baked in that stimulus was coming, but that was weeks ago now, and-- and Congress is still at an impasse. When we do get a stimulus, if we do get a stimulus-- because it still seems very likely that we will-- do you think that the markets have continued to make that stimulus in, or do you think it can actually serve as a catalyst to shoot these markets higher right now?

IVAN FEINSETH: Well, I think both. The market's expecting the package. Just because it didn't come when it was expected, as-- you know, it was supposed to be mid-August, and then the end of August, and then maybe right when Congress gets back from the August recess right after Labor Day. But I think a package is coming, and I think it's probably going to be somewhere around 1 and 1/2 trillion dollars.

I know it's going to be down significantly from the 3 and 1/2 trillion that the Democrats originally proposed. I know Nancy Pelosi has come down to 2.2 trillion, which you recently mentioned. The Republicans were at a billion. I think that they could meet around-- I'm sorry, a trillion-- meet around a trillion and a half. But we are going to need another package. The markets expecting another package. I think it would be happy with anything at or above 1 and 1/2 trillion.

It will also become a political football starting next month as we go into the election. But the Democrats are at risk, too, to being viewed as the party that is not cooperating, and they-- their base is unfortunately a significant portion of the people that have either been laid off or furloughed or even unemployed right now. So it's important to both parties and important to the market that we get another package.

KRISTIN MYERS: So speaking of that election, before I let you go, Ivan, how much do you see the elections in November being a risk to the markets right now?

IVAN FEINSETH: Well, I think it's the next hurdle we would like to get over. I-- I hate the statement that the market hates uncertainty because just the only thing that is certain is that nothing is certain. However, it's the next point of uncertainty to get over. I am calling for a Trump win. It's not endorsement of Trump. I'm just saying that he has an incumbent advantage, and I think that we could see another November upset where Trump wins.

I also think the Republicans keep control of the Senate, the Democrats keep control of the House. Also, when there is split control of both houses of Congress, the market does tend to do better. So I think that Trump is viewed as the more market friendly candidate based on his views on taxes and on regulation.

I think both candidates are going to take a hard line toward China as being a-- a common enemy to point to, too, but Biden is looked at as being a little bit softer on trade and maybe would pull back on some of the tariffs. So it's going to be a-- probably the most contentious election in modern history, and it will be a key point to get over for the market. And then I think you will see a year-end rally after that.

KRISTIN MYERS: All right, well, election predictor and chief investment officer at Tigress Financial Partners, Ivan Feinseth. Thanks so much for joining us today.

IVAN FEINSETH: Thank you.