Scott Colbert, chief economist at Commerce Trust Company, on the eve of last November’s presidential election predicted a ‘blue wave’ followed by a rotation into value stocks.
“The Democratic turnout is going to be much larger than it was, and that’s enough right there to carry most of those swing states back to the Democratic side,” Colbert said last Oct. 28. “You’re not going to have enough pro-Trump voters to offset that Democratic wave.”
This would lead to “Democrats rolling this thing” and taking back the Senate as well as the White House. The biggest change for markets would be a rotation from growth to value. “It’s the combination of the election and a vaccine,” Colbert said.
Corporate America would be punished in the terms of higher tax rates, which would affect growth companies more than any other segment of the market. This would make growth stocks less appealing to investors. Value stocks would benefit from this development.
“If you’re looking for a contrarian play, I think it’s the rotation to value,” Colbert said.