Yahoo Finance's Alexis Christoforous and David Lefkowitz, head of equities for the Americas at UBS Global Wealth Management discuss the latest market moves.
ALEXIS CHRISTOFOROUS: I want to stick with the markets now and ask David Lefkowitz to join us. He is head of equities for the Americas at UBS Global Wealth Management. David, thanks so much for being with us. I'm curious what your clients are telling you as we move closer to Election Day. Have they changed their portfolio positions? Are they holding on to a little more cash?
DAVID LEFKOWITZ: Yeah, Alexis, I mean, as we've seen over the last couple of months and definitely as we've gotten closer to the election, our clients have been a little bit cautious. I mean, there's definitely a lot of uncertainty about how this election will go. And there are definitely big differences in terms of policy priorities between the candidates.
So I think what we've seen from UBS clients is really no different from what we're seeing from market participants more broadly, is just there's uncertainty as we go into the election, and not to mention the fact that if it's a very close election, it could be contested. And that could add some volatility to the marketplace.
So I would say investor sentiment is somewhat subdued. But we haven't seen wholesale changes in portfolios. It's more on the margins, I would say, Alexis.
ALEXIS CHRISTOFOROUS: Do they-- are they getting specific about what it is they're honing in on or what it is they're concerned about? Is it a Biden presidency and what that might mean for corporate taxes? Is it what is all this going to mean for a possible stimulus package? What are they telling you?
DAVID LEFKOWITZ: Yeah, I would say it's all of the above. I mean, it's-- and we try to-- you know, we try to encourage our clients to separate their political views from their portfolio. But a lot of times, clients get wrapped up in their own sort of political outlook. And so, therefore, people in one political party fear policies that might be popular in another political party.
But look, we've run the numbers. I mean, if we do have a corporate tax increase, along with a fiscal stimulus, we think that's manageable for corporate profits. We think on a net basis, we're probably looking at actually slightly higher corporate profits. Obviously, it depends on the size of the fiscal stimulus, as well as the ultimate size of the tax increase.
Definitely been a lot of interest in renewable energy and alternatives to fossil fuels because that's been a key part of Biden's platform, and also interest in infrastructure plays as well. So, you know, there's kind of a range of themes that potentially could come out of the election. And we've seen interest and discussion about all of that amongst our client base.
ALEXIS CHRISTOFOROUS: Which scenario do you think most investors want to see happen tomorrow?
DAVID LEFKOWITZ: I think most investors want clarity. I think that's probably the issue that has been-- I would call the tail risk that investors are fearing the most is a lack of-- or a lack of certainty around the outcome of the election.
But for the most part, investors-- once investors know the rules of the road, then investors can deploy a strategy and a plan in order to have a portfolio that is designed to prosper in those rules of the road. So I think that's really what investors want to see, is some clarity. And if we don't get clarity in the next couple of days, we could be looking at some more volatility in the markets as a result of that lack of clarity.
ALEXIS CHRISTOFOROUS: If we don't get clarity, say, for a few days, do you see a 10% drop for the market, possibly something even more dramatic than that?
DAVID LEFKOWITZ: 10% is probably at the higher end of what I would expect. You know, at the end of the day, the market is going to be driven by the economy. And I still think regardless of the outcome or regardless of the winner-- let's put it that way.
Regardless of who is actually in the White House on January 20 or in Congress in January, that defeating the pandemic and recovery from the pandemic is still going to be the most important market driver. And therefore, the economic recovery will continue.
Now there could be winners and losers in terms of some of the different policy priorities. But at the end of the day, it's the recovery in the economy that's going to matter the most. So yes, there could be some volatility if there is uncertainty around the election outcome. But I don't think it will be as large as the 10% that we were discussing.
ALEXIS CHRISTOFOROUS: All right, well, we're all going to be here watching every minute of it, as you are. David Lefkowitz of UBS Global Wealth Management, thanks so much for being with us.
DAVID LEFKOWITZ: Thank you, Alexis.