John Hancock Funding Control’s Co-Chief Funding Strategist Matt Miskin joins Wealth! Providing information about the potential impact of the election on the broader market and which alternative elements are being bought and sold.
Miskin argues that the market is affected more by deficit spending than by who wins: “It’s all caused by more deficit spending, and it doesn’t mean it’s Republican or Democrat, really the last eight.” Over the years, regardless, it’s increasing deficit spending, which, theoretically, increases the Treasury supply, increases Treasury yields.”
He adds: “So you’ve seen a rise in the long end of the Treasury yield curve… the 30-year is actually unchanged from the 2-year for the first time in a long time. So that usually means weakness in smaller caps.” , weakness in the financial sector. And now the idea is to have smaller caps and less regulation on financials that really helps those parts of the market, so that’s really a big change under the hood of the market as politics come more front and center. As a market driver.”
For more professional insights and real market action, click here to watch this full episode of Wealth!
This post was written by nicholas jacobino
video transcript
Stay tuned to the 2024 elections and their potential impact on the markets.
We have Matt Miskin, who is John Hancock Funding Control, co-key funding strategist, Matt.
It’s a pleasure to be here with you this morning.
Uh, I’d just start off with understanding how you’re looking in terms of the weekend’s events and the market.
So we’re seeing recently that miniature caps have continued their epic rally and they’ve actually begun to rally on the inflation record that was going to be the setting for interest rate cuts.
So the idea was that when inflation comes, rates go down which gives the nearest small cap companies better leverage, lowering interest rates.
Excellent.
These days we are moving fast and our rates have gone up and small caps are still growing rapidly.
So we’ve gone from a last-minute low rate, inflation regime reduction to the Trump industry, which is small caps and a bearish steepener.
And that’s breaking the important dynamics that are really underlying this market.
Beautiful hats and treasures have been as correlated as they have ever been in history.
And so we’re preparing to introduce political uh into the markets.
We do not consider it sustainable.
We don’t invest according to politics because it is very unpredictable.
And even though you finalized Trump, he was president yesterday, right?
The winners throughout the four years of his leadership have been large cap expansion, tech and Chinese stocks, not small caps.
And so when you look at the history here, it doesn’t mean that this kind of rotation won’t get additional legs.
Um so we just want to figure out if this is possibly an industry.
However, looking at the fundamentals, we forecast to bias additional large cap, upper component type companies.
You know, it’s interesting and you started saying that the Trump industry is most likely going to have a tough season, as you’ve been tracking them.
What is its composition?
Yes, this is all the opposite of big deficit spending.
Um and it’s not, you know, over the last 8 years it’s really been Republican or Democrat, even though it’s increasing inflationary spending.
So that theoretically increases in treasury supply should lead to increase in treasury handovers.
So you’ve isolated the long end of the creation of the Treasury handover curve, which actually reverses a handover lasting 30 years from day two to the future in an extended day one.
Um in order though in most cases the closest anticipated um problem on small caps, problem on financials.
And the idea now is certainly less legislation on small caps and financials that is really helping those parts of the market.
Um so this is really a massive change under the hood of the market as politics moves to the front, gateway and center as a market driving force, let’s focus on some of the bigger issues you want.’ Are you watching this moment carefully?
Inflation, company profits, as I continue to dig out the key information coming out of FactSet on a weekly basis.
Just holding on to this early level, they are also in second quarter profits for the S and P 500.
It’s quite a mixed start and we’re given lightless rock Goldman Sachs here to kick off the moment.
What’s the topic you’re looking forward to playing this profit season?
Yes, Brad, at this point it’s all about winners and losers.
And as you identified, some of these companies that have been the first to report are the upper component companies that are taking market share.
Umm, they’re doing really well and the book value is already turning into profits.
So, you know, for us, it’s going to be a little bit like show me, show me something excellent here uh because it’s already in line with your value.
And it’s widely any other factor, you know, you’re talking about a scene whose last moment was Comfy Touchdown Island, um grab a drink and relax around the market.
So that should cause your initial unemployment claims to decline and inflation to decline.
So that you have higher financial information which reduces inflation.
This is the most efficient case position.
Um and what we’re seeing is that despite all this political confusion, the last part of this future is now priced into another Fed charge cut.
So the idea is that the Fed will now cut rates three times in the last part of this future, which is really providing a good buffer for volatility and potentially also helping equities at this time.
When you talk about winners and losers are there positive sectors that you’re expecting to outperform or ultimately catch up to the broader industry this earnings season.
Yes, we see some segments of the market catching up.
We like mid-cap industrialists.
They have better fiscal coverage support with respect to building productive renaissance across the United States.
They are focusing more on us, which is really helping their companies.
Um but with respect to the top component technical aspect, you know, for us, it is most likely to bring excellent effects, however it is in the associated fee and it is additionally difficult because basically you are pronouncing, Hello, this might be a better trade, although look, it’s a bundle.
If there is a sense of a discount, whether it’s to guidance or not, whether it’s to earnings or even to the base layout, it will really see some promotional power.
Matt, it’s great to talk to you.
Farewell commendable.
Thank you so much for spending the day with us here on Yahoo Finance, John Hancock Funding Control, Co-Leader Funding Strategist, Matt Miskin.
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