An unknown after the election will kick off volatility: RegentAtlantic CIO
Chris Cordaro, Managing Partner and Chief Investment Officer, RegentAtlantic joins the On the Move panel to discuss the impact of the election on the markets.
Video Transcript
- Let's talk more about what's going on with the markets and what they could be anticipating. For that we bring in Chris Cordaro. He is Managing Partner, Chief Investment Officer at RegentAtlantic. He's joining us from New Jersey.
Chris, thank you for being with us. And I know you, like many, many investors, are looking ahead to the election and trying to sort of game out what the risks around it could be. And I know you're also not just looking at the outcome of the election, but how long it might take. So how are you factoring that in? And how long do you think it will take?
CHRIS CORDARO: Sure. Well, I think that we're certainly not going to know by Wednesday morning after Election Day. I think that's the odds-on favorite. And I know that we can be patient for a while with this.
And so I'm looking at, unless it's a landslide, which we don't think it will be, it will probably be several weeks before we definitely know the winner of the election. And I think the important thing here is to realize that that's likely going to kick up a fair amount of volatility in the markets. And we should be expecting this.
- What if you're wrong? I mean, we've got James Carville. I realize he's a Democrat. He's saying we're going to know by 10:30 Tuesday night. So what if you're wrong?
CHRIS CORDARO: Well, if I'm wrong, what will happen is the market just wants certainty. And so if I'm wrong, it's going to be good for the market. And what it will basically do is it'll mean that opportunities to take advantage of volatility will disappear. But I think if I'm wrong, and we do know by 10:30 Tuesday, the market's going to respond well to that.
- And so how are you positioning yourself, then, given all of that, given what might happen, given all of the potential outcomes here? Do you focus on the long term and focus less on that 24, or 48, or seven-day period following the election?
CHRIS CORDARO: I don't think you can focus on the short term, because it is so unknown that you have to stay focused on the long term. And you have to position your portfolio for 2021. And you have to realize that we will, at some point, know the winner of the election.
And once we do, businesses are really good at getting back to business. I mean, once businesses know the rules, once we know what the tax environment is going to be, once we know what the fiscal and monetary policy is going to be, businesses are really good at getting back to business. And so that's all they-- is that.
- Aren't we're going to know the rules regardless of the outcome? For instance, we know Joe Biden wants to go to 28% corporate tax. We know there's going to be some kind of stimulus, no matter who wins this election. The only question is how much.
So if you're looking for return, we've heard from Jay Powell and the gang over at the Fed. They're not raising interest rates in the next year. So your only choice is going to be equities, even if they might be a little expensive right now, right?
CHRIS CORDARO: That's true. I mean, the interest rates are not going up anytime soon. And so fixed income needs to be in your portfolios, a buffer on volatility, but really getting much of a total return out of fixed income is not going to be there. And so it really comes down to equities.
And what we look at on the equity side is that we think for now, you really do need to be in the higher-quality growth names that have been driving the market. But at some point in 2021, I believe that shifts to more industrial and some of the stocks that have been left behind in this recovery.
- And so when do you start making your own portfolio shift, then, with those kinds of companies? Given that a lot of the economic numbers have already been better than anticipated, but is it too early, at this point, to get in on this?
CHRIS CORDARO: I think it's too early to overdo it at this point. The inflection point will come, but if you've got there too early this year, you're really hurting. And so you really don't want to be early on this, and you're better off trying as best as you can to be a little bit late on that switch. I'd rather be a little bit late than over-early on it.
