This week’s Alpha Trader features hosts Aaron Task and Stephen Alpher talking with Scott Bauer, CEO of Prosper Trading Academy, and Chris Zaccarelli, chief investment officer at Independent Investor Alliance.
First up is Bauer, who in two previous appearances on Alpha Trader made prescient bullish calls on gold (last November) and mega-cap tech (last July). He remains bullish on both, though cognizant that Covid and election news could provide some volatility.
Try to look past that, says Bauer, and remember 1) the Fed has assured zero rates for well into the future, and 2) there’s going to be a fiscal stimulus deal of some sort, whether it comes in the lame duck session, or early 2021. Also consider the chance that a vaccine and/or effective treatment becomes available, and we have a third prong of the argument for higher share prices.
Bauer’s a Chicago guy, so of course the conversation moved towards the subject of volatility. Volatility (VIX) has come down of late, but remains elevated, and probably about where it ought to be given all the news out there (and potential for even more news), says Bauer. Should the election be calmly settled next Tuesday night though, there’s potential for a crash in the VIX.
Zaccarelli has similar thoughts to Bauer on volatility, but is a bit more wary that we’re going to wake up next Wednesday morning to a nicely settled election result. It’s not enough to make him bearish, but he is advising clients to reduce risk by taking some money out of the hot-handed growth names, and putting it into some blander value plays. Think financials (NYSEARCA:XLF), industrials (NYSEARCA:XLI), and materials (NYSEARCA:XLB), instead of tech (NYSEARCA:XLK) and communication services.
Investors should also consider the upside surprise of a “blue wave” in the election. Yes, there may be higher capital gains taxes and corporate taxes, but the extent of how those might hurt stock prices isn’t assured. Instead, investors may want to focus on just how big of a fiscal stimulus package might get passed early next year if the Democrats control Congress and the White House (remember 2009).
There’s plenty more, including Bauer’s super-simple explanation about how to interpret the VIX in terms of stock market movement, and Zaccarelli’s argument for why energy (NYSEARCA:XLE) is very much not a buy even at these low levels.
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