The prospect of a new presidential administration led by President-elect Joe Biden has led some to wonder if he’ll be tougher on tech companies or make good on his promises to raise taxes on high earners. But does this change in leadership mean market participants should start to move their assets or restructure their portfolios?
“For the most part, none of this is something that people should use as a basis for changing their portfolios,” said Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management.
Ritholtz spoke with “Marketplace Morning Report” host David Brancaccio about why you shouldn’t make any sudden moves with your retirement account right now. The following is an edited transcript of their conversation.
David Brancaccio: Let’s talk here to real people, not you big dogs with your fancy portfolios. Maybe someone’s got some retirement money in the markets, maybe another nest egg where they have some discretion as to how it gets allocated. President-elect Biden: Does that headline, in itself, mean it’s time to make some adjustments?
Barry Ritholtz: So let me throw that question back at you in a different way. Pick any elected president, go back 100 years. I mean, with the exception of President Hoover, because we know what’s going to happen with the 1929 crash and the Great Depression, it’s hard to see how electing any president makes a difference to people’s long-term portfolios. One of my favorite things to do is to show people a chart of employment, of wages, of GDP, of retail sales, going from 2010 to 2020, with the dates stripped out of the bottom, and say to people, “show me where the Obama presidency ended, when the Trump presidency begins.” You can’t do it, it looks like the exact same path.
Biden “centrist” policies
Brancaccio: It’s interesting. And I suppose underscoring your point is that at the moment, it looks like the U.S. Senate will be controlled by a different party from the White House. And that would suggest that significant radical new changes in policy may not be happening.
Ritholtz: So let’s clarify that slightly. In order for there to be divided government, the Republicans must retain only one of two seats in the Jan. 5 Georgia runoff. The betting markets, the statistics, suggest the Republicans have an easier path — they just have to win one of two seats. The Democrats have to sweep. But that said, one of the things I think people forget, Biden is this centrist, deal-making, across-the-aisle, old-school politician. You know, Bernie Sanders lost. Elizabeth Warren lost. The left wing of the Democratic Party lost. Biden is this middle-of-the-road guy. He wants an infrastructure plan, he wants to rebalance some of the Trump tax cuts, which benefited a lot of the top 1%, a lot of us Wall Street fat cats — I’m not quite a fat cat but, you know, I live in the town right next to the fat cats. So those sort of adjustments are, you know, pretty center Democratic. You know, before everybody moved to the far extremes, this was, you know, run-of-the-mill Democratic policies.
When and why you should change your investment portfolio
Brancaccio: But I mean, you know, this is a moment. We’re saving the front pages of the newspapers these days, because they look historic to us. So maybe not a bad time to reflect on your portfolio.
Ritholtz: Sure. So let’s think about it this way: When are the best times to make the sort of changes we’re discussing? And usually it’s when you are objective and you are incorporating major life events: people get married, or they have kids, or some other event creates a future financial liability, meaning, hey, we’re going to have to pay for college 18 years off in the future, or we’re going to be retiring 25 years off in the future. When you have those life events, those major changes, well that’s when you make adjustments to your portfolio.
But, you know, political affairs and headlines? Think back to any major news over the past couple of decades. For the most part, none of this is something that people should use as a basis for changing their portfolios. Now, that said, if you want to own some technology because we figured out, thanks to the pandemic and the working-from-home period, that companies like Apple and Amazon and Google and Facebook and Microsoft are really doing well, and they’re likely to continue doing well no matter what happens. But no one should be making wholesale changes in their portfolio based on which candidate won.
The exception being, if you’re one of those people that are fortunate enough to have $24 million, meaning that anything over that is what is likely to be taxed in your estate. Well, then you have some planning to do if Biden manages to change some of the tax rules, and that’s really just a matter of what you’re doing to minimize, legally, how much taxes you pay. That’s perfectly allowable. But changing your allocation between stocks and bonds, moving to cash — any big change caused by the headlines, that’s an emotional reaction, and emotions are never a good guide star for managing your assets.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
