Four top economists attempted to answer why the markets seem almost indifferent to what is perhaps the most intense election in US history on Wednesday at the Tel Aviv Stock Exchange virtual panel “Going to Market.”
Ayalon Group chief strategist Yaniv Pagot, who moderated the panel, confronted Bank Leumi chief economist Gil Bufman and asked how the elephant in the room, COVID-19, will affect the markets. Bufman said that “this might be more important than who sits in the White House.”According to Bufman, the best-case scenario would be if a vaccination might be available in the space of roughly half a year. Until then, he suggested, the world will focus on individual COVID-19 tests to allow people to fly at ease, and create drugs to suppress symptoms of the novel coronavirus.
Bufman argued that we are not seeing a “blue wave,” a situation where Democrats gain control of the Congress and the Senate, and as a result he expects that if Joe Biden wins, he will not be able to curb pollution or regulate the healthcare market.
“It will be very difficult to realize a vision of green energy under such conditions,” he said, even if Biden will eventually sit in the Oval Office.
He noted that technological infrastructure, IT and the construction sector are still doing extremely well in the US and that these trends are likely to continue. He added that it might be worthwhile to remember that President Donald Trump hinted he would replace Federal Reserve chairman Jerome Powell over his refusing to lower federal interest rates.
“Such a move would give us a clear signal on what is about to happen,” he suggested.
David Reznik, interest rates strategist at Bank Leumi’s financial markets division, largely agreed and added that “NIS 3 billion are currently ‘sleeping’ in people’s bank accounts seeking an investment” after being taken out of various funds due to people becoming worried during the global recession.
He said that the Israeli stock market is doing “fairly well” when compared to the rest of the world, and suggested that “we close the gap” when the issue is facilitating investments in technology.
Rinat Ashkenazi, head of research at Excellence Investment House, explained that Biden raised some alarm bells in various sectors. The technology sector was concerned that new anti-monopoly legislation would diminish profits, and the pharmaceutical industry was worried the Democrats would force a lower price on medical drugs.
With the “blue wave” not happening, “the new digital economy is back as a market leader,” she explained. “A split Congress can’t act against the large pharmaceutical companies,” she noted.
The healthcare and communication sectors are surging, and, according to her, people can pick and choose in what parts of each sector they wish to invest – for example, genetic design and medical robots within the larger healthcare sector.
She claimed that even if Trump uses anti-green economy rhetoric, “that’s where the money is going to.” The vast majority of Democrats (80%) support this trend, as do most Republicans (55%), meaning that it can’t be stopped, she argued.
“Europe is in pain right now due to Brexit and the second COVID-19 wave,” she said. “China, on the other hand, is leading, both in the old economy and the new one, especially in pushing forward to greater energy efficiency.“I would consider investing my money in the Far East,” she concluded. “Nothing can stop technology.”