Trump is not going quietly and the fiscal stimulus will not come easily, but investors have bigger things to worry about


2020 has already been a year for the record books, and some say the toughest parts are yet to come.

One of the most controversial elections in recent US history has finally come to an end, but President Donald Trump refuses to accept it, jeopardizing a smooth transfer of power even as a health crisis government is accelerating, and raising the specter of a constitutional crisis.

At the same time, it’s clear to almost everyone that the economy is in desperate need of more tax support, but no one in a position to do it can agree on how to do it.Still, sources who spoke to MarketWatch say it’s time to take a deep breath. The markets will be good – rough, but good – and the republic will live to see another day. Further, most say Washington is not our biggest problem, even though it requires most of our attention.

“First of all, Joe Biden is the President of the United States, regardless of anything anyone reads or says,” said Chris Dillon, financial markets investment specialist for T. Rowe Price. “We’re not going to spend energy even speculating on the chicane. We are not wasting our intellectual capital on this. Remember when President Trump announced that the economy would reopen at Easter? We didn’t pay attention then. We believe in the institutional power of the United States ”

Behind the scenes in Washington, most players recognize that former Vice President Joe Biden is indeed president-elect and is moving forward, said Stephen Myrow, managing partner of Washington-based Beacon Policy Advisors.

“We have a well-established process for how it works and everyone knows it,” said Myrow, who co-founded Beacon after several decades in public service. “Trump doesn’t look at him like everyone else and there’s nothing you can do about it. It’s just an ongoing process. It’s like your two year old is having a temper tantrum. It’s embarrassing, but it’s okay.

And while some attention has been focused on the Trump administration’s refusal to allow a smooth transition for Biden’s team, “to be honest, what is this team going to explain to them that will help?” ” Myrow said. “My opinion is that the Biden team is going to come in and assume everything is wrong and broken unless proven otherwise.”

L’indice S&P 500 SPX,
+ 1,36%
has gained more than 5% since election day on Nov. 3, noted Steve Blitz, chief US economist at TS Lombard.

“It’s the markets telling you this is the way it is, everyone has to give Trump space so that he doesn’t hurt and then he will go. He will always say he lost unfairly, but when has Trump ever lost and says it was right? Nobody actually worries about tanks on the street, ”Blitz told MarketWatch.

Among those sources, there is less consensus on another Congressional tax break plan, but, oddly enough, all three analysts believe Wall Street has a role to play in getting things done.

See: How low do stocks have to drop for Washington to act? You may not like the answer

“There are a lot of challenges to doing something in the lame duck session,” Myrow said. And Republicans might have a more optimistic view of the economy than Democrats, he said, given the strong jobs report and the promise of a vaccine sooner than expected, making them less likely to process before January.

BioNTech BNTX,
+ 4,30%
et Pfizer Inc. PFE,
+ 2,85%
announced last Monday that its vaccine candidate was 90% effective in phase 3 clinical trials, raising stock prices this week.

Myrow thinks the surge in risk in financial markets that followed Pfizer’s announcement is very telling: “Right now the market is too optimistic about a return to normal. With the vaccine, it’s like they don’t care if we get the stimulus now or later. The market is convinced that if we don’t get more taxes, the Fed must intervene.

But Steve Blitz believes Congress will approve a small interim package as part of its late-November budget negotiation process to keep the federal government open over the holiday season, and then revisit the matter in February. “By then, we may need a bigger package to help those newly dislocated by the virus,” he said.

But if Congress is unable to deliver anything, Blitz said, “the only thing that will move politics is the markets. As we did in the spring. If suddenly the stock market crates, everything is bipartisan. It is done. But if the market is still trading at high levels, it will be difficult.

All that to say: Washington should no longer be the biggest scarecrow of the markets. COVID-19 should be.

“The virus is still alive and well,” Dillon said in an interview. “The momentum of this without an organized federal response and Trump’s lack of transition to the Biden administration makes the United States vulnerable in the short term, even with the news from Pfizer.” Now is not the time to be a hero in your asset allocation, even with a stimulating environment and more budget support to come. ”

It’s a cliché now, but “expect short-term volatility,” Blitz said. “I think given the valuations, there is more risk on the downside than on the upside. I would have the money and I would wait. If the market goes down, I would have price targets to buy stocks or sectors that will outperform in an economy where everyone is going to be rushing to shop, eat, travel, be in the office again. Just like Zoom ZM,
gone to the moon, it will be a slingshot.

U.S. stock indexes have risen in the most recent week, supported by optimism about the vaccine, among others. The Dow Jones Industrial Average DJIA,
+ 1,37%
closed at 29,479.81, after briefly moving above its previous closing high. The S&P 500 hit a new high at 3585.15, as did the Russell 2000 RUT small cap,
+ 2,08%
. Only the Nasdaq Composite Index COMP, responsible for technology,
+ 1,02%
was lower for the week, ending at 11,829.29.

Economic data expected in the coming week includes retail sales and industrial production on Tuesday, housing starts on Wednesday and existing home sales on Thursday.

Read more:These are ETFs that will help you prepare for a Biden Presidency


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