Baird PWM Market Strategist Michael Antonelli joins the On the Move panel to discuss the latest market action ahead of the 2020 presidential election.
ADAM SHAPIRO: But let's bring in Michael Antonelli right now. He is Baird PWM market strategist. Good to have you here, joining us from Milwaukee. That question I asked the Mooch is something that you've alluded to, is that the markets seem now to have less concern about a prolonged fight over the outcome of the November 3rd election. We're seeing that in markets. Do you think the economy is reflecting that as well? What's your take on this?
MICHAEL ANTONELLI: Yeah, I can't believe I'm going to say this. I mean, I agree with the Mooch. I didn't think that would be part of my career at any point. But I agree with the Mooch's take on the market. He's right. Markets-- [INAUDIBLE] markets are not partisan. We try to pour all of our partisanship into them. And they ignore that.
Let me tell you two things. Number one, number one, central banks around the world are flooding the markets with stimulus. The Federal Reserve increased its balance sheet in the past few months by more than they did during the global financial crisis times two. That financial stimulus, that extra money flow, that really supports risk assets. So the economy, we're bouncing off of levels, we're bouncing off an unemployment level that's one of the worst in history. Generally, markets do well when we're bouncing off troughing unemployment levels.
So you know this combination of things that I believe overwhelms people's worries about the election. And let's be clear here. The market knows the policies of both of these candidates. Nothing is going to surprise it. And right now, we're about 6% off all time highs. Stop trying to make the market, you know, follow your partisanship, is what I would beg people.
JULIE HYMAN: Although I feel like it's tempting fate to say nothing would surprise these markets, Mike. Famous last words. No, hopefully you're right on that front. But you know, I keep bringing up this phrase that a guest of ours used last week, the principal economist at LinkedIn, the idea of a COVID ceiling when it comes to employment, that there are just some industries and some jobs that cannot come back until we are past this.
And so then I come back to the idea of the disconnect between the economy and the markets, right, the idea that, yes, you're right, there's a lot of liquidity still coming in. But there are parts of the economy that are stagnating. Yeah, things are bouncing off the bottom. But now they seem to have come up against a bit of a limit here. They're only bouncing so far.
MICHAEL ANTONELLI: I would probably buy into that notion. Saw the news about the Cinemark, I believe it was, the theaters in the United States. They're going to close them probably till next year, I would imagine. That's employees that aren't going to be able to be working. You look at Disney, the layoffs, we saw just a slew of layoffs. California, they're struggling to get Disneyland back open. So you're right, I think that ceiling-- that ceiling argument, I am sympathetic to it. But hopefully-- and I think the markets are probably pricing this in even today, the notion of stimulus, the notion that we might get another bit of congressional aide here, fiscal support, instead of just monetary support, I think that's why you're seeing small caps do what they do for the past few days.
Right now, if you looked at the sectors that are doing well, they're all kind of the return-to-work sectors. So marry that monetary policy with some fiscal policy. I saw Goldman saying that a blue wave, they would upgrade their growth forecasts. So, you know, let's try to put the partisanship aside and say, the government should be here helping these kind of problems, this COVID ceiling helping us get through that till we get to the vaccine.
JULIA LA ROCHE: Hey, Michael, it's Julia La Roche. And I just appreciate the way you break things down and explain them. And I have a question for you. And I think maybe some of our viewers might as well. So just looking-- I did a quick check today. Stocks are up. Yields are up. Yeah, gold is up. Oil is up. And the VIX is up. Why is the VIX up? Can you us understand that?
MICHAEL ANTONELLI: Yeah, I spent a little time this morning trying to investigate that myself. I mean, there's so much great-quality derivative content out there that I said, I'm going to dig in to see what I can find. And I think there's some technical reasons here. I think you're coming off of a weekend that was-- guys, I mean, who wasn't looking at Twitter and Yahoo, like, nonstop? We were coming off a weekend where there was so much news and political news that I think that's pouring into the VIX a little bit.
There's some technicalities. There's some options that are starting to be priced into. There's some [INAUDIBLE] options which has, as we know, an election, and being priced into the current VIX curve. So there's a couple technicalities that are bringing that VIX up.
But you're right. It is stubborn. You're talking about market's 6% away from an all-time high and the VIX at 30. You know, there are some hurdles out there that we need to jump over. But I, for one-- I just want to remind everybody that the market knows about the election. It knows!
RICK NEWMAN: Hey, Michael. I thought you had more to say on that. Anyway, you know, we still have a pretty grim employment situation with or without more stimulus. I mean, we've got businesses closing everywhere. Some of them are not going to reopen. A lot of temporary layoffs are becoming permanent. What's the likelihood that this economy actually gets worse rather than gradually better?
MICHAEL ANTONELLI: It's another great question. You guys have all the best questions. And I love coming on and seeing you guys. I think you could get some sort of dip. I don't I don't think that the situation, the scenario, is there for a significant dip. Again, the Fed is not out of bullets. That's one of the worst takes in the history of finance [INAUDIBLE]. Fed is not out of bullets. They can do more.
The government can certainly do more. This notion of a COVID ceiling that Julie brought up, that's really what I think has the market kind of in a malaise right now. We're getting better. But we can't get back to where we were. And we came out of a jobs market that was the best jobs market since Kennedy was in office. That's a high bar to get back to.
I mean, unemployment, the number of people working it was significantly strong. A pandemic hit out of everybody's control. And it kind of slammed us. The take on, we're in this kind of corridor, I think, is the right take to have. I don't think the upside is all that easy. But the downside, I think, is supported by not only fiscal, monetary, the globe, and a vaccine that hopefully, we're praying, comes out soon.