Ahead of the U.S. presidential election, speculation about the impact either result would have on the market was rife. Two weeks ago, Samuel Leach interviewed Chief Global Market Strategist Stephen Innes from AxiTrader on the potential impact of the upcoming election result, the ramifications of COVID-19, and the outlook for the coming months. Let’s take a look at some of the highlights from the insightful interview.
The U.S. Election and the Markets
The interview was recorded before the election, so the hot topic was how it would affect the markets. “Have you weighed in a Biden victory or are you leaning towards that side at the moment, and what does that look like in the markets to you?” opened Leach.
“I think the safest place to be is in equities,” said Innes in the interview. “I think either presidential victory means we’re going to get a bounce. If Trump gets in, the Republicans aren’t going to lavish the markets as extremely as the Democrats would. But still, stocks are going to go higher. They probably won’t fly, but I think they will go higher.”
Despite this, during the interview with Leach, Innes suggested that there was one sector investors should be wary of. “We have to be careful here because I think both protagonists are quite strict about regulating the tech sector,” he said. “We’re starting to see globally that some of these monopolistic tech companies who are melding both technology and financial concerns together are concerning for financial sectors.”
“Banks are so far behind the landscape when it comes to technology,” explained Innes. “They are going to have to lay people off and improve technology. Governments don’t want that to happen because they need the financial support from the banks.”
The Continuous Impact of COVID-19
Needless to say, the U.S. election is not the only factor to keep in mind here. During the interview, both Leach and Innes touched upon the ongoing pandemic, with the latter saying that while commodities should rise in the coming weeks. According to the recent trends, he believes that we’re set to see a stark change in this particular sector.
“Looking at the relative nature of the soft-rolling type lockdowns across Europe,” he said. “My feeling is that the market is going to look through those. We’re starting to see some proxy-trading, especially around commodities, travel, and leisure. Institutions are buying that stuff and that suggests to me their models are actually showing that they expect the COVID curve to flatten within the next four to six weeks.”
“That plays well in the overall growth narrative, but look we’ve been focussing on one thing only here which is the election but, in my view, the real stimulus package, which is coming down the road is going to be the vaccine. We can’t rule that out. That could possibly be a game-changer here. If we get some sort of efficacy with even one or two of the candidates of more than 70%, that would be unbelievable,” said Innes.
The Outlook for Gold in 2020/21
Towards the end of the interview, Leach brought up the matter of gold. During this period of uncertainty, the question is whether investing in precious metals is a smart move, or whether the ongoing political and international changes would make it insecure.
“I think the central banks carry the day for gold,” said Innes. “The looser monetary policy is going to be supportive for gold. We need inflation to spark, which has been absent for years and we need clarity on the Federal Reserve Board’s average inflation targeting.”
When Leach suggested that the news of a vaccine could instill consumers with faith when it comes to gold, Innes agreed. He explained that, despite recent fluxes in the market, keeping hold of gold rather than selling it could be a savvy choice now.
“Gold has moved off more of the central bank policy,” said Innes. “I think if we do get a vaccine, that’s going to be an impulse for inflation to go higher, and that’s a good reason to own gold [and] not a good reason to sell gold.”
“I think on this election, it’s been so hard to factor everything that we’ve had that’s happened over the course of Trump’s presidency and also the fact that we’ve got COVID and the economy now coming into play,” agreed Leach. He then asked what advice Innes would give to investors who are eager to trade in the coming weeks.
“As I always advise, keep risks very close to your chest. Don’t go too heavy today. It’s not a great day. There’s going to be lots of opportunity to spend a lot tomorrow when the path of least resistance becomes clear; whether that’s dollar up or dollar down. So trade gently for today but keep some powder dry for the rest of the week.”
About Samuel Leach
Samuel Leach first started trading at the age of 18 and has grown an investing empire. He now runs a multinational, multi-million-pound trading business, Samuel & Co. Trading. The business aims to “help as many people as possible to achieve the level of wealth we believe is possible via trading the financial markets.” Regardless of your experience, getting expert guidance can help you excel.