Genus Weekly In Focus – Addressing COVID-19 Concerns Week-30

Ian Lusher: [00:00:04] Welcome, everyone, to week 30 of the Genus weekly in Focus. I can’t believe it’s been 30 weeks.

Wayne Wachell: [00:00:10] 30 Weeks.

Ian Lusher: [00:00:10] 30 weeks. My name is Ian Lusher. I’m a partner and portfolio manager with Genus Capital Management, and I’m here with our CEO, Wayne Wachell. So let’s get it started. First of all, week of October, Wayne, how have the markets reacted this week?

Wayne Wachell: [00:00:29] It was a good week for markets. A lot of hope around a COVID stimulus plan in the US, which gave the markets some hope, a lot of volatility around that. But so far, so good. Markets up around three percent for the week. A bit of a cyclical bias hopes that the economy is coming around again and some good numbers of China as well. And that helped push bond rates back up around 10 basis points. So equities up and bond prices down effectively. So good week for us for Genus, I think.

Ian Lusher: [00:00:58] Right, I was reading that this was the best week in the market since August, so we haven’t had a week like this for a little while. So what does a week like this meant for Genus clients in their portfolios? What have we done that has helped?

Wayne Wachell: [00:01:13] It was a good good week. We were overweight equities and underweight bonds. So equities are up and bonds were down. Good for us. And from a value from a stock selection perspective, we have a bit of value. Our dividend fund came back a little bit with the cyclical stocks and value driven stocks. But all in all, a good week for us.

Ian Lusher: [00:01:33] Right. So what’s on everyone’s mind these days is everything to do with the US election, but I wanted to take a step back and ask you, everyone’s focusing on Biden versus Trump, but a lot of the investment experts are actually focusing on the Senate race. So can you go through that for clients as to why the Senate race is so important?

Wayne Wachell: [00:01:56] Well, the reason this is so important is they control the purse strings. They control the money. So if Biden got in, he couldn’t raise taxes. They have to get approval, anything fiscal from the Senate. So that’s that’s a big, big deal. And it would really cut it really would hamper Biden’s agenda. And he probably could play with maybe deregulation or regulation, but that would be about it unless he brought on the Republicans.

Ian Lusher: [00:02:22] Right, yeah, and the polls involving the Senate are a lot closer than the polls involving Biden and Trump, so on that same theme. Biden appears to be up in the polls right now, so another question we’re getting from a lot of clients and we’re talking about a lot in our meetings is in general, how would how do you believe the market will react to a Biden victory?

Wayne Wachell: [00:02:48] Well, I think in the short run, it’s going to be positive. Look at Biden’s agenda, if there is a blue wave and he does take the Senate, there are two positives, and that would be more fiscal stimulus spent in the course of next next year. And as well, he’ll probably be he’s more of a globalist, so he’ll definitely be more trade friendly with China and probably Europe. Those are two positives. The negative, of course, is taxes. And the word on the street is that tax, a tax increase probably won’t happen until later on next year or into twenty, twenty two. So you get all the good up front and you get the bad later on. So the market tends to focus more on the short run. Six to nine months is going to focus on the good stuff versus the bad thing coming down the road. And you’ll also probably have a bit of a negative impact, I’d say, in terms of deregulation. Generally, in the short run, I would say a positive, but longer term, if they raise taxes, that’s about 10 bucks off the S&P earnings from about two hundred points on the S&P, I would say, into next year. But we’ll have to see what happens. So that’s why the hope is that Republicans will hold the Senate and you have a Biden if you have a Biden presidency, the Senate is held by the Republicans.

Ian Lusher: [00:04:01] Right. So long term then, are there certain sectors that are disadvantaged in certain areas and industries and sectors that are disadvantaged by a Biden victory versus, say, Trump?

Wayne Wachell: [00:04:15] Yes. Well, no one is energy, you know, with his green plan is going to impact energy energy stocks. And also, it’s not just it’s probably regulation that would probably impact them more than anything else, as well as the financials is more more of a regulation push there. Elizabeth Warren was big on big on going against the banks in that regard. And there’s also some concern about the major tech companies. The Democrats really want to go in there and they’re concerned about anti-competitive behaviour by them. So I say energy, financials and techs might get impacted by a Biden regime. And on the positive side, you can see green stocks racing, all the green stocks moving already green infrastructure to pump a lot of money that that would be the big winner. So infrastructure and green oriented names would be the winners I would say and probably some maybe some health care is because if they if they if they support the the Obamacare, that’ll help some of those areas in there.

Ian Lusher: [00:05:13]  Right. So given that if there is a period of time where there is some uncertainty about the outcome, it’s in the courts. Are you do you view that as an opportunity for Genus clients?

Wayne Wachell: [00:05:26] I see it as a buying opportunity, I guess I have some faith in their republic, they have rules and they have and I think it’ll come down to probably a Supreme Court ruling wherever it goes. But I do have faith in the republic that it will probably stand the test of time. And as it happened with the Bush Witchboard and there will be a result may, may not please a lot of people but there will be a result and I think they have the governing structure in place to to see a finale to this, this wild and wacky election.

Ian Lusher: [00:06:03] I have one last question that I’m going to throw you off the cuff here, Trump obviously went to the hospital, took Regeneron trucks and a couple other therapeutics that are fairly new. And do you think this actually has any effect? Doesn’t matter what you think about Donald Trump or not, but the effect of somebody that is a public figure going into the hospital with covid, who’s coming out with some therapeutics and actually coming out fairly quickly.Do you think that has had any effect in the way the market is viewing covid going forward?

Wayne Wachell: [00:06:37] I think it has. I think basically the fact that somebody was one of the most important person in the world has this is this drug that’s in phase two and it seems to work well on him and it’s a good test results. Is this going to give? This is going to really raise the profile of it, I believe. And then it does work. And I think it’s something that especially the older population can rely on longer term. So I think it’s a bit of a plus in terms of dealing with covid, I’m not sure that’ll have an impact on the election. I don’t know about that. But I just say I think it’s going to help remove some of the stigma and fear of covid out there, especially for the vulnerable. So it’s it’s a good sign. Definitely a good sign.

Ian Lusher: [00:07:21] Right. Well, I have to end this on a positive note. This is one of the most positive weeks we’ve had just in general with everyday news and also a long weekend coming up. So we wish a happy Thanksgiving to everyone. And we’ll see you again next week.