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Season 2, Episode 33: Watch for ‘Blue Wave,’ Followed by Rotation Into Value Stocks

With Scott Colbert, chief economist, Commerce Trust Company

Scott Colbert, chief economist at Commerce Trust Company in St. Louis, rejoins the Contrarian Investor Podcast to discuss the state of the economy on the eve of the 2020 U.S. presidential election. 

In Colbert’s view, the economic recovery is “square root” shaped, with a quick bounce from the bottom followed by “the lazy L that comes after the easy V-part.” Politically, he anticipates a Biden victory and return of the Senate to democratic control. This will eventually lead to a higher tax rate for corporations, which together with a coronavirus vaccine will cause a rotation into value stocks.

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Season 2, Episode 28 — Transcribed: Economic Growth Prospects Are Better Than Advertised

Alex Chausovsky of ITR Economics discusses the metrics pointing to continued recovery from COVID

This transcript was made available immediately after the episode aired to premium subscribers. Become one here for just $8/month or $88/year, or $199 lifetime. These prices stand to increase Nov. 1.

Nathaniel E. Baker 0:00
Alex Chausovsky of ITR economics. Thank you so much for joining me Contrarian Investor Podcast. The topic of today is this economic recovery. And the current narrative, I would, if I dare to say that is kind of this point taken hold, is that this recovery is not really on very firm footing, that we’ve seen just recently in September. Now, some hiccups, especially from tech stocks, you hear a lot about how valuations are extremely rich, and potentially even overvalued, even in light of this last correction in the tech sector. And that, you know, again, maybe the US consumer will not return in full force, the jobs, especially an employment picture, is not a very firm footing. So that that I would say, it’s fair to say that that is at least one prevailing view that has taken hold here, as we record this on September 17. But you have your view is, is it goes against that, and you actually have reasons to be a little bit more optimistic about the economic recovery. So tell me about that.

Alex Chausovsky 1:19
Yeah, there’s, there’s a couple of different ways that you can look at this. And and I’m going to try to keep it fairly top level by first of all addressing the very real downside risks that still exist to the economy. We are obviously heading into the flu season, into the colder winter months, we have no way of knowing how the pandemic is going to behave when it combines with the flu season, whether or not we’re going to have a huge upswell in cases and in deaths and hospitalization rates. But basically, what we’re tracking on the COVID side right now is that the data is painting at relatively favorable picture, the case counts are down over the last six weeks, in some cases quite significantly. So if you look at kind of the mid July timeframe, we were averaging about 70,000 cases per day, we’re now averaging somewhere around the 35,000 mark. So it’s still a high number, but not nearly as scary as what was going on in the summer months. If we look at deaths, they have pulled back and again, not anywhere near the original swell that we had during that March, April May timeframe. So that’s encouraging. And really, when it comes to talking about the economic impact of the pandemic, what you have to understand is, it’s not the cases or the deaths, or the hospitalization rates that determine the impact. It’s how we react to those to that information. And what we’re seeing is that it is extremely unlikely at this point that we have the same kind of countrywide or statewide shutdowns that really kind of crippled the economy in the second half of the second quarter of the year. So our premise for the recovery to building momentum from this point on onward is assuming that we do not have the same kind of stay at home orders or sector wide shutdowns that we saw in early 2020. The other component that I think should be mentioned here as a risk factor is the absence of government stimulus, right, we had a large part of the green shoots of recovery, if you will, had to do with the direct payments that individuals they had to do with the additional unemployment benefits, and certainly the PPP program, providing what is essentially a liquidity bridge for both consumers and businesses to get past the chasms of the pandemic. Right. Right now, there is obviously squabbling going on on Capitol Hill, the democrats win support for state of the market.

Nathaniel E. Baker 3:33
Yeah, to put it mildly

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Season 2, Episode 32: Opportunities May Be Brewing in Cyclical Stocks

With Christian Putz, ARR Investments

Christian Putz is an Austrian-born hedge fund manager currently based in London. His fund has outperformed benchmarks this year during one of the more unpredictable periods in recent memory.

Behind this success is an understanding and appreciation of the big-picture macro environment. Only when that is taken into account does the fund look at individual stocks.

Right now the macro picture is mostly benign with the U.S. election looming. Many sectors remain strong. There are buying opportunities brewing, especially in the oil and gas industry.

Content

  • The macro picture versus individual stocks and where things stand right now (7:28);
  • Economically, things look rather benign. Buying opportunities may abound in the energy industry especially (13:09);
  • Risks “are more to the upside,” with steepening yield curve. This may bode well for the financial sector (16:05);
  • Recent months have seen a rebound in copper prices. That may be overdone. There is a bear market case to be made post election (18:38);
  • Background on the guest (22:39);
  • The fund’s current portfolio allocation (32:10);
  • The benefits of utilities right now (33:42);

For more information on the guest:

Not intended as investment advice.

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