By David Bailin
Chief Investment Officer
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While increased US fiscal stimulus and accelerated vaccine rollout seem likely, many investors think equity valuations are too high. What are their fears and are they justified?
As Americans watched an actual assault of the seat of democracy on January 6th, equity investors remained remarkably sanguine. Even as members of Congress fled the chambers of government, markets were steady. In the face of a negative jobs report, more daily COVID deaths than have ever been recorded in the US and an electorate where 34% of voters do not trust the accuracy of the US election results (NPR/Marist poll 12/9/20), the bull market continues. And as it does so, many investors flush with cash are waiting for a correction to add to portfolios or are sure the bull market is over.
President-elect Joe Biden is set to take office Jan. 20 with a razor-thin majority in Congress. Expectations for further fiscal stimulus have risen as a result. Though there is fear of new taxes, a goldilocks scenario where rates would rise modestly is being presumed. Vaccine distribution is likely to be accelerated and the development of new vaccines to mitigate the risk of new variants will be accelerated too. Many believe equity valuations appear too high, even assuming all of these assumptions become realities. What are their fears and are they justified? Thus, this Bulletin!Read the CIO Strategy Bulletin