How to navigate various Trump-Biden scenarios, plus an interview with investing legend Rob Arnott
Hello everyone! Welcome to this weekly roundup of Investing stories from deputy editor Joe Ciolli. Please subscribe here to get this newsletter in your inbox every week.
Dear Readers,
What's already been a wild year for markets got even more turbulent late last week when President Donald Trump tested positive for COVID-19. Stocks immediately took a dive upon digesting the news — and their subsequent recovery was just as sharp amid encouraging reports around Trump's status and subsequent hospital discharge.
The whole ordeal added even more uncertainty to a market already grappling with its fair share of question marks. Some experts viewed Trump's diagnosis as a positive for stocks, arguing that it will inspire people to take more precautions. Another school of thought suggested that any minimization of the virus' effect by Trump behalf might worsen the situation.
So which one is it? And will the election — coming our way in just four weeks — overrule whichever it is in short order?
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On the election front, even though Trump has long claimed a Democratic win would tank markets, Wall Street has been increasingly arguing the opposite as Joe Biden distances himself in the polls. Just yesterday, the chief economist at Goldman Sachs said that a Biden-led blue wave would lead the firm to boost its economic growth forecasts.
JPMorgan has a more nuanced, albeit constructive view. The firm suggests that instead of tanking on a Biden win, equities will see a mass rotation into beaten-down value stocks. That could mean a stock-picking bonanza.
This renewed market volatility and the resulting range of forecasts has informed Business Insider's work in recent weeks. See below Business Insider's best Investing stories of the week, which include a wide array of additional recommendations, strategies, and tips for navigating uncertainty.
Thanks for reading!
-- Joe
An exclusive interview with investing pioneer Rob Arnott
The world's biggest and best investment firms pay Rob Arnott for advice. For years, Arnott has spread the gospel of an investment strategy known as "smart beta," which has evolved into one of the world's hottest investment strategies and grown into a roughly $1 trillion industry.
In an exclusive interview, Arnott shared with Business Insider he's seeing opportunities and finding value now. While he sees some big bubbles forming, he also identifies sectors where he see "extraordinary bargains."
Read the full story here:
'We are going to see some big shifts in the coming 3 to 6 months': Investing pioneer Rob Arnott sounds the alarm on 'quite a few bubbles' in the market, including the tech boom — and tells us where he is finding bargains now
Secrets from a portfolio manager dominating the market
The Alger Small-Cap Focus Fund and Mid-Cap Focus Fund, managed by Amy Zhang, have returned 27.39% and 46.08% this year, respectively. Both have outperformed their benchmarks and nearly all of their category peers.
Small- and mid-cap stocks are not only attractive on a valuation basis but also more insulated from political and geopolitical tensions, Zhang told Business Insider. She also shared four stock picks that have helped drive her outperformance across both funds.
Read the full story here:
A portfolio manager who's outperforming nearly all of her peers this year shares 4 high-conviction stocks driving her strong performance across 2 funds
Overhauling how to protect against stock crashes
In September, defensive assets that investors use to hedge stock-market losses performed at their weakest since the Global Financial Crisis. JPMorgan's John Normand recently laid out three alternatives to defensives that investors can consider to hedge their bets.
Read the full story here:
JPMORGAN: The best defenses against stock-market crashes are delivering their weakest results in a decade. Here are 3 ways to adjust your portfolio for this predicament.
Stock pick central
Seeking experts who are willing to name names? Look no further:
- BANK OF AMERICA: Buy these 29 high-quality value stocks primed to cash in on the economic recovery
- GOLDMAN SACHS: Buy these 16 stocks best-positioned to take advantage of unprecedented Fed money printing and potentially higher inflation in the years ahead
- MORGAN STANLEY: Buy these 16 stocks to cheaply invest in next-generation technologies and reap the future profits they generate
- Sustainable-stock funds are snapping up shares of these 20 companies — and most of them beat the market during September's turmoil, RBC says
- Bank of America says buy these 11 stocks to profit as e-commerce and robotics revolutionize their businesses and keep them growing faster than peers
- Morgan Stanley shares European stocks across 5 sectors that will soar in a post-COVID recovery
Chart of the week
The chart above reflects the futility of owning assets that have served as historically reliable hedges: US Treasurys, gold, the Japanese yen, emerging-market bonds, and quality stocks.
In response to this, JPMorgan's John Normand recently laid out three alternatives to defensives that investors can consider to hedge their bets.
Click here for more details
Quote of the week
"A typical basket of defensives is functioning about as well as fire insurance that covers just one bedroom in the house."
— John Normand, JPMorgan's head of cross asset fundamental strategy, discussing just how poorly traditional stock-market hedges have been working recently