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Weekly Manager Views: Equities

16 October 2020

At GAM Investments’ Weekly Equities Meeting held on 13 October, four of our managers shared their views on the upcoming US elections and potential market implications.

Christophe Eggmann – Healthcare Equities

At this stage, we would caution against making predictions on the outcome of the US elections based on national polls. The polls were wrong in 2016 and there is no reason to suggest they will be more reliable this year. The prospect of a so-called “blue wave” (Biden winning the race to the White House and the Democrats taking control of both houses of Congress) appears to be priced in, with the healthcare sector trading at a 22% discount to the S&P 500. Our view has not changed; we continue to believe the best outcome for the sector is a split Congress with either Biden or Trump as president. This would lead to gridlock, likely benefitting the healthcare industry.

Ali Miremadi – Global Equities

A clear negative outcome from the US elections on 3 November would be a contested result, although that may be less likely than feared. Irrespective of the result, key issues are unlikely to disappear. US-China tensions will persist. We can also expect large fiscal stimulus from either a Biden or Trump administration; the result of the election (as long as it is not contested) may simply not matter much for investors. Meanwhile, the rotation question (growth versus value) continues to hang over equity managers and markets.

Jian Shi Cortesi – China Equities

The US-China rivalry is deep rooted and will persist, in our view. Both countries have similar sized economies and therefore, by definition, are competing for economic and technological leadership. We think a Trump victory would lead to a higher probability of a disruptive approach to China relations, while a Biden win would be less disruptive. However, in general, we do not expect the picture to change and believe China will increasingly focus on domestic consumption as external relations sour.

Davide Marchesin – Global Long / Short Equity

Our aim is to insulate ourselves from political events / results. Clearly, uncertainty and delays regarding the result of the US elections will lead to volatility; other outcomes may also cause volatility. Although a Trump win looks unlikely, defence stocks and US banks could rebound sharply in such a scenario. Meanwhile, a Biden win and a “blue wave” could lead to a weaker US dollar due to the large level of stimulus likely to be pushed through by Democrats. This outcome may also cause a rotation from big tech to industrials and renewables.

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development. The companies listed were selected from the universe of companies covered by the portfolio managers to assist the reader in better understanding the themes presented. The companies included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice.