Anyone who tuned in to Wednesday’s United States VP debate will know that the pandemic drove the conversation. Viewers were treated to a rather more detail-oriented contest than the lumbering and disrespectful face-off between their respective bosses. But what hints can be gleaned for TSX shareholders from the deeply polarized race for power just over the border?
It’s all about the pandemic
Senator Kamala Harris stated point blank Wednesday night that she would not take a vaccine touted specifically by President Donald Trump. VP Mike Pence was quick to suggest that this stance undermined the Republican vaccine effort, accusing Harris of trying to score political points at the expense of American lives.
But Harris’ stance should be instructive for investors looking for ways to park cash and even grow wealth off the back of this election. The twin campaigns being run right now are almost entirely about the pandemic and who best can quell its social and economic ravages. Investors should therefore expect some increased momentum in healthcare stocks this fall – in both directions.
Joe Biden’s proposed corporate tax increase from 21% to 28% might also give the general investor some pointers as to which way the markets might swing come November. Would Biden walk this back tax hike proposal upon winning? It’s possible that a Biden administration might be more pro-market that his campaign. But this might be a moot point if the very suggestion of higher taxes precludes his victory.
Another battleground asset type mentioned a couple of times during the debate was the auto industry. TSX investors might want to watch Magna International. Upside could come not only from a plausible post-election boost to the North American auto space, but also from a possible breakthrough in Sino-American relations. Via a key partnership, Magna already has access to electric vehicle growth in Asia, making this a rare all-weather play for growth potential.
Look to historical precedents in a choppy fall market
Meanwhile, stimulus measures have provided more market-moving headlines. Trump has been vacillating between postponing stimulus talks until after November and fuelling hopes for extra fiscal support.
Once again, Canadian equities showed that they have fallen into step with U.S. markets, with the S&P/TSX Composite Index climbing 0.65% Thursday. Investors are bullish on stimulus hopes – not only across the border, but also right here at home. From CERB to the U.S. election, economic uncertainty hangs over Canadian stocks, causing mini-selloffs and driving rallies.
Two big tipping points are coming, though. Most obviously is the deployment of a working vaccine. Growth stocks are likely to see extra upside as appetite for risk reawakens. But the November election itself could skewer the markets if investors get spooked. The reaction in stocks will come down to expectations. Broadly speaking, though, the past week has shown that the markets appear to favour the status quo.
Barbell investing with a build-and-trim adjustment could work this November. This involves balancing near-term recovery names with longer-range low-volatility dividend stocks. Investors should look back to March for pointers on which names could survive, thrive, or nosedive.
