Raymond James Chief Investment Officer Larry Adam believes a split government will help markets surge, according to Business Insider.
President Donald Trump had been vocal about his positive effect on US markets. "Your 401k's will crash with Biden," he tweeted once. "If anyone but me takes over in 2020 (I know the competition very well), there will be a market Crash the likes of which has not been seen before!" he tweeted later.
However, when Vice President Joe Biden was presumed the winner of the election, with a presumed Republican-controlled Senate, markets skyrocketed. Adam was not surprised by these results. He stated that a Biden administration with a split Congress was the market's preferred outcome. A lot of this has to do with the fact that Republicans will most likely block corporate or individual tax hikes.
"Finally we can stop fretting about politics and start focusing on business and your money again," Jim Cramer said. "Because a divided Congress and a blue White House, well that's called Nirvana for growth stocks."
Adam also touched on trade policy. "It takes off some of the trade rhetoric with Biden as president and that helps a lot of the multinationals," Adam said. "It weakens the dollar as global growth is probably a bit more positive, so that helps those multinationals."
Biden also has a strong record of working with Mitch McConnell. "If you look back through history, Mitch McConnell and Biden have worked together," Adam said. "They've been able to negotiate a couple deals over their tenure down in Washington, especially when Biden was vice president with some of those issues like the fiscal cliff."
Adams likes these 4 sectors for the upcoming administration.
- Technology: "I think tech continues to be a beneficiary of COVID-19, as people want to do more and more from their homes, building out their offices. ANd I think valuations, the one thing people misplace there, if you look at it on an absolute basis, it's the most expensive, but if you look on a relative basis, it's not expensive," he said. "Keep in mind that tech beats its earnings by the largest magnitude, 7% or 8%. So when you factor that in quarter after quarter, I think it's attractive fundamentally and thematically."
- Healthcare: due to attractive valuations and aging demographics.
- Communication Services: "It's the broadband rollout, it's all about content, it's a beneficiary from COVID-19 — people staying at home — and I think that's likely to continue," he said. "To me, valuations remain attractive in that space as well."
- Consumer Discretionary: "Those are two areas that have benefitted from what's happened with this environment," he said. "And going forward I think that transition to ecommerce is likely to continue, and that should continue to drive visibility of earnings going forward."