It’s not an endorsement, but if you’re a 401(k) advisor, you want Hillary Clinton to win, at least according to scenarios detailed by market prognosticator Greg Valliere. The popular speaker and chief global strategist of Horizon Investments joined Horizon president and CEO Robbie Cannon for a wide-ranging web seminar discussion on the election, possible action by the Fed, and possible October surprises in the form of Black Swans.
“Both candidates have called for a reinstatement of Glass-Steagall, but Trump also wants to reverse favorable treatment of the Carried Interest tax,” Valliere began. “Clinton shows no interest in going after the tax-deferred aspects of 401(k)s, as Obama did.”
Cannon noted three paths for the general election the firm is currently seeing; a Clinton landslide, a narrow Clinton victory and a narrow Trump victory.
“The last two are most likely, with Clinton winning by a narrow margin,” Cannon said.
Valliere emphasized the disappearance of a Clinton landslide is not due to a rise in Trump’s popularity, but more about growing voter antipathy with Hillary Clinton.
“The chances of her winning in a landslide, which many pundits predicted in late spring and early summer (but not me), I think has really slipped dramatically,” he explained. “She’s close enough now in the polling to be within the statistical margin of error. These polls are important for the market because a narrow Clinton victory means the House will most certainly stay Republican, and the Senate might also. If you have divided government like that, the markets could live with a Clinton victory.”
Moving on to possible interest rate hikes by the Federal Reserve, Valliere said it’s “willing to wait,” as there is no compelling reason to raise rates.
“They don’t want to call attention to themselves, and certainly not a week before the election, so I think December will be it,” he added. “You have to acknowledge Janet Yellen is the most dovish fed chairman in our lifetime. I don’t think she’s in any great rush.”
Saying he hates to sound overly naïve, he sees a Goldilocks’ scenario of moderate GDP growth, a good labor market, no sign of inflation, consumer spending going much higher, and the Fed taking its sweet time.
“You add it all up and that’s not a bad set of fundamentals.”
Possible October surprises that could sway the election include:
- more emails released from Julian Assange that, he claims, will be embarrassing for Hillary Clinton;
- Obamacare and the fact that it’s not doing well;
- health records—both hers and his;
- Trump’s tax records that might show that he’s not worth as much as he claims and hasn’t paid much in taxes.
“Then there’s the big one that you can’t quantify, which is terrorism,” Valliere solemnly noted. “The odds that between now and election day there is no terrorism is sadly close to zero. We’ll see how it affects the candidates.”
Both Cannon and Valliere agreed that there will most likely be some sort of fiscal package in 2017 as fatigue over fiscal restraint continues to grow, infrastructure crumbles and demand for tax reform increases, specifically with the issue of repatriation.
“Hillary would want a deal, as would Trump, who says he’s very good at making them,” Valliere argued. “Then you have Paul Ryan in the House who wants a deal, and has made them in the past, and Chuck Schumer, who is taking over as leader of the Senate from the obstructionist Harry Reid.”
Cannon claimed the security and defense stocks would “look pretty rosy” with a Clinton win, something to which Valliere agreed, noting “she would be pretty hawkish, and not show a desire to cut defense spending.”
“I always tell clients that anything she has on her agenda to punish Wall Street will not make it through the House. Paul Ryan and the very conservative Ways and Means chairman Kevin Brady would allow for tax reform, but not tax hikes.”