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Financial Experts Discuss the Post-Election Financial Market Scenarios

By Rich Shopes

SARASOTA (November 20, 2020) -- Financial experts participating in a webinar hosted by the University of South Florida and Sarasota-based Cumberland Advisors said the improving economy and recent good news about potential COVID-19 vaccines point to an upward trend in financial markets next year.

“I think next year will be a better year, but it’s going to be a different year,” said Eddie Sanchez, a finance instructor at USF’s Muma College of Business, director of the Bloomberg Financial Markets Lab at the USF Sarasota-Manatee campus and a longtime hedge fund portfolio manager and securities analyst. “We’re looking to have different companies emerging. Our world is changing, the United States is changing and the way you live and they way you work is changing.”

The USF Sarasota-Manatee campus hosted the 90-minute webinar, “Post-Election Financial Markets,” which was offered at no charge to the public and touched on the economy, the pandemic’s impact on equity markets and the outlook for stocks and bonds heading into 2021.

The speakers contrasted the pandemic’s drag on markets and volatility surrounding the presidential election with recent upticks in major indexes. Low-interest rates will likely continue into 2021, helping to spur housing and investor interest in stocks. However, possible tax increases could lure investors to the bond market as they point to higher yields, including in municipal bonds.

“The volatility in the bond market is significantly less,” said John Mousseau, president, chief executive officer and director of fixed income at Cumberland, noting recent trends. “We expect that to move back up again towards more normal volatility in the bond market, and that’s strictly going to be as you get this handoff basically from a government-help economy to an economy that’s going to be on its own, plus (COVID-19) vaccination.”

Other speakers from the investment firm included:

David Kotok, the firm’s chief investment officer and co-founder
Robert Eisenbeis, chief monetary economist
Patricia M. Healy, senior vice president of research
Matthew McAleer, executive vice president and director of equity strategies
Bill Witherell, chief global economist
Leo Chen, quantitative strategist, and director of the USF Student Managed Investment Fund

The Global Interdependence Center, a nonprofit that promotes an increase in global dialogue and free trade, sponsored the event along with USF and Cumberland. Jean Kabongo, campus dean in the Muma College of Business and a professor of strategic management and entrepreneurship at the USF Sarasota-Manatee campus, moderated the discussion and introduced the panelists. Joining him was Regional Chancellor Karen A. Holbrook.

Generally, the panelists sounded optimistic looking ahead to 2021. They acknowledged that some trends remain difficult to pinpoint, including the degree to which technology impacts stay-at-home workers once pandemic restrictions are lifted and whether small-cap stocks continue to attract investors away from large-cap growth stocks.

“Take a look at the past four weeks,” McAleer said. “You can really start to see what’s been taking over in the near term. Look at the bottom. What’s the weakest performing equity asset class over the last four weeks? Large-cap growth, money rotating out of large-cap growth and into some of those previously under-performing small cap sectors. The question is whether this rotation is going to be longer lived.”

Also unknown, the speakers said, is the degree to which the federal government will increase taxes next year, whether another government stimulus package will be approved and if runoff elections in Georgia in January swing the Senate majority to Democrat or Republican – all of which offer potential to profoundly affect financial markets.

What is known, they said, is that the economic recovery will take several years to achieve, that America and the world will be changed by that recovery and that technology and innovation will play a key role in the economy and stock market for years to come.

“We went down 30 percent and we are coming up the other side of the V, but when we get back to the top of the V, our economic framework will not have recovered to where we started,” Kotok said. “That may take several years. Financial markets are looking ahead, not at the present. They’re looking for that recovery. And it’s the drive of that recovery and how it evolves, plus how it interfaces with the rest of the world, that will impact the U.S. financial markets, stock markets and bond markets, and our relationships worldwide.”