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Trump Is Good for Growth, Biden Is Good for Value: Bannister

Nov.03 -- Barry Bannister of Stifel Nicolaus talks about how each presidential candidate can impact stocks. He's on "Bloomberg The Open."

Video Transcript

JONATHAN FERRO: Barry, can you walk me through what you're looking for in the next 24 hours and what you think the outcome of the outcomes might be?

BARRY BANNISTER: Thanks, Jonathan. Yeah, the-- generally speaking, Trump is better for growth stocks. That would be, like, tech and consumer discretionary, which of course, includes Amazon. Biden would be better for value stocks, think financials, industrials, and oddly even energy because the dollar would probably be debased. And that drives up oil prices.

If you look at right now, though, it's very interesting. But the pure out defensives, the equal weighted staples, health care utilities, and the level two industry telephones, relative to the S&P, have only been this cheap three times in 50 years. So the market is very uncertain at this point. But again, Trump is growth, Biden is value.

JONATHAN FERRO: Barry, walk me through the balance of risks around that breakdown. When you look at the financials and Biden, we could have a Treasury Secretary that is very, very hawkish on the financials and the banking industry. We could have a regulator come along and do all kinds of things. Barry, when do we start to process that? That extra new ones around the sector level story.

BARRY BANNISTER: Well, the nuance is really that what's different this time is that normally when you loosen up fiscal policy, you tighten monetary policy as an offset. This time, you have loose monetary and loose fiscal policy, which is reflationary. If it is a blue wave, as you said, what you'd have is reflation, a weaker dollar, a steeper curve.

Now, housing might slow if this curve steepens too much. You'd have a lower P/E but higher EPS. And so those markets, those value markets tend to go up. But they also go up less in terms of degree than the growth markets. The growth markets would be the opposite of all those outcomes.

JONATHAN FERRO: Barry, Bloomberg subscribers written in and asked the best sector to hold through 2021. If you can answer that and also tell us how dependent that would be on the results of the next 24 hours.

BARRY BANNISTER: Well, if it's Trump and a Republican Senate, I would say that technology, this is particularly these FANMAG stocks, Facebook, Amazon, Netflix, Microsoft, Apple, Google, they would outperform. And if it's Biden, I would say financial stocks because the curve would steepen, they're very cheap. They would benefit from this macro environment of reflation. And so those are the two extremes here.

JONATHAN FERRO: Can you walk me through how defensive you are, Barry, going into this event?

BARRY BANNISTER: You know, I think that, obviously, the market thought Trump's odds are about 35%. But I think it's closer to 50/50. And what really matters is the Senate, you know, our focus for months and when I last spoke to you was on the Senate. The Senate, through parliamentary procedures, has a lot of impact.

Think about the filibuster, think about the danger of blowing up the filibuster, as we found out in 2013, when Reid did it, and of course, McConnell turned it back on him with the Supreme Court. Think about reconciliation. That's how they passed the 2017 tax cut. That's a 10-year revenue neutral terminus bill.

And that would mean the taxes come up sooner, I would think. And that would be market negative. So you've got to really focus on the Senate tonight. I would focus on that more than the White House.

JONATHAN FERRO: Barry, just finally from me, how much of your outlook, then, is held hostage by this election?

BARRY BANNISTER: I'm tied up in a corner with a bandana through my mouth, I'm a total hostage right now. So we're going to be here watching for this election.