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How Trump testing positive for Covid-19 will impact markets

Greg Valliere, AGF Investments Chief U.S. Policy Strategist and Kevin Mahn, Hennion & Walsh CIO join Yahoo Finance’s On The Move panel to weigh in on how markets are reacting to Trump testing positive for Covid-19.

Video Transcript

ADAM SHAPIRO: Let's see if we can break this down even further as we invite into the stream Greg Valliere, AGF Investments chief US policy strategist, as well as Kevin Mahn, he is Hennion & Walsh CIO. Good to have both of you here. Let me start with you, Greg, the overall implications of what is still unfolding, what would you tell us?

GREG VALLIERE: Well, I think this president desperately wanted to avoid talking much about COVID in the month of October. I thought that the Supreme Court pick would accomplish that for him. I think he was looking forward to getting a new justice confirmed. Now, I think, between today and November 3, we're going to talk a lot about COVID.

JULIE HYMAN: And that discussion doesn't seem to be a very happy one for the markets in this morning. Kevin, we're seeing a decline here, although, it has lessened to some degree, right, since we got under way this morning and even compared with the futures trading early in the morning. What's your read through for the markets of the significance of this?

KEVIN MAHN: Sure, and let me start by just wishing President Trump and the first lady a full and speedy recovery. But this just adds another level of uncertainty going into Election Day, both with respect to the outcome of the election, how long that's going to take to determine a winner, who is going to be in control of Congress.

And add all of that, Jules, to, will there be another stimulus bill, the open seat of Ruth Bader Ginsburg and the timing of her replacement and, of course, the timing of a potential COVID-19 vaccine candidate. That's a lot of uncertainty, and that creates a lot of volatility in the days and perhaps months ahead.

DAN ROBERTS: Greg and Kevin, Dan Roberts here. Thanks for joining us. You know, there's sort of a double-edged way to approach this, because the big two questions, and each of you can feel this from your respective expertise areas, what does it mean for Trump's chances in the election? You know, you would certainly think that this would hurt things.

But I've seen people try to make the opposite argument and say, actually, if he emerges in two weeks and says, oh, look, I'm healthy, I beat it, I'm fine, maybe it helps and inspires confidence. And then for markets, you know, you mentioned, Kevin, well, it's more uncertainty, in some ways, this isn't that unexpected [INAUDIBLE].

So I guess I'd ask each of you whether you think there's any way this could be good, maybe, Greg, you go first. [INAUDIBLE].

GREG VALLIERE: Yeah, I look back upon-- I look back upon 1981 when Ronald Reagan was shot. He handled it quite well with some humor. He came back, I think he got a wave of sympathy and goodwill from the public. This could occur also for Trump. And you have to say, he's getting the best medical care in the world, odds would favor him of beating this.

And if he does beat it with some, again, good humor, it could actually ironically be a plus.

KEVIN MAHN: Yeah, and I won't touch upon necessarily the election prediction, but just in terms of the investment outlook, I do think there were a couple of thematic areas that resonate right now in the markets, regardless of who wins the election on November 3. As we work more remotely, as we shop more remotely, as we educate our youth more remotely, and, of course, the heightened need for innovative health care solutions, opportunities in health care, e-commerce, and technology resonate beyond November 3, and perhaps for the years to come.

GREG VALLIERE: Oh, can't hear you.

ADAM SHAPIRO: I muted, I have a bit of a cough, hopefully it's not COVID. Trying not to interrupt people. So Greg, I am curious, when you talk about this possibly being handled with humor, couldn't the president, should he and hopefully recovers from this, and if it is a mild case, I mean, I know an 88-year-old who recovered from COVID-19, doesn't that send a message to the country that, yes, this is horrific, we've lost a great many of our countrymen, countrywomen as well, but that this is a survivable disease, especially for a man who is overweight, not necessarily in the best of health, and 74 years old?

GREG VALLIERE: Yeah, absolutely. He, I think, would have a little more difficulty today saying we've turned the corner than he did yesterday saying we've turned the corner. And I think he'd also have a little more difficulty today saying the economy is in fabulous shape when you look at the unemployment report. And I'd say it's OK, but it's maybe not booming right now.

AKIKO FUJITA: Greg, this question to you, I've had a number of notes come in through my inbox today that talk about how this raises the stakes for the vice presidential debate next week. You know, we know these VP debates normally don't have a whole lot of impact on the presidential race, but do you feel like the stakes have been raised as a result of what's played out today?

GREG VALLIERE: Absolutely. You know, it's entirely possible that'll be the last debate. I'm not certain we will get the next two Democratic debates. So I think there'll be a real focus. And, you know, Pence has good experience. He's been a governor, he's been a House member, vice president for almost four years. Kamala Harris is a pretty good debater. I think that this used to be the sleeper, I think this will be highly viewed.

JULIE HYMAN: Kevin, I want to come back to you on a point that Greg was talking about earlier, and that's about when President Reagan was shot. Greg talked about the sort of public perception. I'm curious about the market perception, right, when we have had events that have maybe sidelined presidents for a while, what the history has been in terms of market reaction or even if this is comparable to those.

KEVIN MAHN: It's hard to say that this is necessarily purely comparable to what happened to Ronald Reagan. But it does add a level of uncertainty, and let's hope that he does have a full recovery and is back on the campaign trail in two weeks. But aside from that, it's hard to make a valid argument that there's not going to be more periods of heightened volatility in the weeks ahead.

There's just too many uncertainties right now. Last week, we saw the third largest outflow from US equity funds ever. Futures and pricing options markets right now are pricing more volatility through December until we have an outcome from this particular election. We don't know the status of the new stimulus bill, we don't know the timing of a vaccine candidate, and we certainly don't know the timing at this point of the replacement for Ruth Bader Ginsburg.

So that's a lot of potential volatility to deal with. That doesn't necessarily mean that investors should rush to the sidelines, though, Jules, as we know there's also a risk of missing out. According to a study from JP Morgan for the time period between 2000 and 2019, had an investor missed the best 10 days in the market over that time frame, their returns were cut in half.

So I said this the last time I was on this show, tongue in cheek, but it still holds true, it's not necessarily about market timing, but it's about time in the market and diversification that's important over the long term.

ADAM SHAPIRO: Kevin, I'm glad you brought up the 25.8 billion that flew out of equity funds the weekend in September 25. We've just learned that Joe Biden has tested for the coronavirus but is waiting, awaiting the results. So we don't have the results yet. So let me throw this last question to Greg. I apologize for a hypothetical, what happens if Biden tests positive for this?

GREG VALLIERE: Well, he'll have to-- everyone around him will have to quarantine. Biden will have to stop his campaign. He looked a little frail in the debate, so I think people would be concerned about his health. But I do think that things will get back to normal by late October. I still think Biden is the slight favorite, and sadly, I am not convinced we'll know until well into December who actually won.

ADAM SHAPIRO: Kevin Mahn from Hennigan & Walsh the CIO as well as Greg Valliere, the AGF Investments chief US policy strategist, we appreciate you're both being here.