Markets always look forward, and with elections just 100 days away, the prospect of a Biden upset is becoming a distinct possibility. The knee-jerk reaction is to sell, since change upsets status quo and magnifies uncertainty. There’s also genuine concern that a President Biden would raise corporate tax rates, undoing one of the key drivers which has propelled stocks 60% since President Trump was elected.
I get all of this, and it makes perfect sense… but stocks aren’t exactly tanking. Mr. Biden would likely go softer on China, removing costly tariffs and easing export controls. He’d also push for increased fiscal stimulus, from expanded jobless benefits and lower middle-class taxes, to a long-awaited infrastructure program. True, drug prices would come under assault and Big Pharma would suffer, but higher Medicare payouts would underpin cashflow for providers. Strategists across Wall Street are modeling what all of this means, but it’s not one-sided. There are pros and cons to each of these outcomes… and we haven’t even considered Congress. I suspect the narrative will flip several times in coming months, and my solution is to focus on individual stocks, not the market. I like stories I can understand.
Source: Bloomberg data
As of 7/27/20, the author holds positions in: SLLK, APLT, APTV, AUPH, BAC, LNG, CVS, ET, EOG, EVFM,GS, HCAT, MLHR, LITE, MA, MKSI, NLTX, NMTR, NTNX, NXPI, OBSV, PXD, PGNY, QCOM, RAPT, WORK, SDC, REAL,TRIL, WW, WPX,HCA, LHX, RPD
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