(New York)

A top Wall Street research team at BTIG has just said that 2021 is going to be a strong year for markets. They view the current volatility in equities as a good buying opportunity. In either a Trump or Biden win, the economy is probably going to receive additional COVID stimulus, as well as further spending, such as an infrastructure bill. Investors are so focused on the risks associated with the election that they have lost sight of the fact that either outcome will likely be positive for the economy and markets.

FINSUM: We tend to agree with this view, even though it is simplistic. In either outcome, both sides of the aisle will probably be served by being more collaborative than at present, so more economic stimulus is coming.

(Washington)

Polls have Biden well ahead of President Trump at the moment. In fact, some pollsters say that Biden is further ahead leading up to election day than any candidate in the last 20 years. Markets have somewhat followed this and are clearly anticipating a Biden victory. That said, there is almost nobody who doesn’t think the race will be very close. So, how to play it if Trump surprises the markets and wins? Three sectors seem like they would benefit most strongly: traditional energy companies, defense companies, and large-cap banks. Trump’s light-touch regulatory approach would help energy companies and large banks, while defense spending would probably continue to rise under Trump.

FINSUM: Most agree that if Trump surprises, the market is not going to shoot higher like it did in 2016, primarily because there is not a big proposed tax cut.

(San Francisco)

There are rising fears about the potential over-valuation of big tech megacaps. While they have risen very strongly this year, their P/E ratios are not the only worry. Regulations are also weighing on investors’ minds, especially after the announcement of the anti-trust probe by the DOJ into Google. That has not stopped the stocks from rallying, however. Most investors are betting that the government’s numerous overtures about anti-trust moves (which have come from both sides of the aisle) are merely saber-rattling.

FINSUM: As it concerns large cap value versus big tech stocks, the answer is simple—it seems like time to buy both. Big tech may keep rising, but there is enough fear to keep other large cap stocks rising as we enter a prolonged recovery, as they have been for several weeks.

(New York)

Dividends have had a tough year. Because of the pandemic, many companies have had to cut their dividends in the face of losses or declining profitability. Even some who have maintained or raised dividends cannot really afford to do so. Therefore stable, rising dividends with healthy underlying companies are very prized right now. Here are some good names to look at: Whirlpool, Avery Dennison, American Electric Power, and Crown Castle International. All four have recently raised their dividends on the back of robust business. Whirlpool, a major appliance manufacturer seems to be riding the home improvement wave, while Avery Dennison, which makes packaging, is likely benefitting from ecommerce gains. The others (a utility and a cell tower company) have inherently durable businesses.

FINSUM: Cell towers, utilities, and packaging materials seem like very strong areas even if the pandemic gets worse this winter, and there is almost zero rate risk at present.

(New York)

A new study from Cerulli Associates has found that wirehouses are performing very well in one regard—advisor productivity. The average wirehouse advisor has $175m in AUM, almost double the industry average of $77.9m. Even more amazingly, wirehouse productivity has risen from an average of $148m at the end of 2018 (to $175m at the end of 2019). However, wirehouses are still shedding many advisors to RIAs and IBDs. Cerulli identified two key reasons why. The first is as old as the industry itself—compensation. According to Cerulli, wirehouse advisors are growing increasingly tired of “complicated and sporadically changing compensation grids”. Additionally, support staff is an area where advisors are frustrated, reporting a lack of support staff as an issue at a far higher rates than at other BDs and RIAs.

FINSUM: Wirehouse advisors currently enjoy two advantages—brand strength and scalable firm-wide technologies. Neither is enough to stem the current outflows of advisors, and the technology aspect is quickly being eroded by improving tech stacks for independent advisors.