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2020 Elections: The Key Issues and How to Prepare for What May Be Next

Watch as expert panelists explore the issues shaping this general election and what it could mean for the markets and economy

2020 Elections:

The Key Issues and How to Prepare for

What May Be Next




Candace Browning,

Head of BofA Global Research


Edward J. Hill,

Senior Vice President and Public Policy Executive,

Bank of America

Chris Hyzy,

Chief Investment Officer,

Merrill and Bank of America Private Bank


And Savita Subramanian,

Head of U.S. Equity and Quantitative Strategy

and Head of Environmental, Social and Governance Research,

BofA Global Research




Please see important information at the end of this program.


Candace Browning:

Hello and welcome to this special virtual program. I'm Candace Browning head of BofA Global Research. National elections are by definition pivotal moments for the United States, but it certainly is hard to recall one taking place in a year quite like this one.  We've been experiencing a global health crisis, economic downturn, rising tensions with China and many other challenges that could make this election season one of the most important in recent history.  And developments continue to change by the day, even the minute, making it hard to keep pace with the news cycle.  The next administration and Congress, whatever their political makeup, will make decisions that will affect the future of our country, as well as our relations with the rest of the world.

So what's at stake? Which policy priorities are taking center stage and what effect might they have on the economy, the markets and our financial lives?

Joining me for insights into these questions and more are Ed Hill, Senior Vice President and Public Policy Executive for Bank of America.


Ed Hill:

Hi, Candace.

Candace Browning:

Chris Hyzy, Chief investment Officer for Merrill and Bank of America Private Bank.


Chris Hyzy:

Hello, Candace.


Candace Browning:

And Savita Subramanian, Head of U.S. Equity and Quantitative Strategy for BofA Global Research.


Savita Subramanian:

Hi, Candace.

Candace Browning:

So let's start by taking a look at the extraordinary events of 2020.  Chris, you've been watching the pandemic and its impact on the economy very closely. Where do we stand right now in these final weeks before Election Day and how important a role are containing the pandemic and reopening the economy playing in the election dialogue?

Chris Hyzy:

Well, the actual reopening process itself is absolutely paramount. It's what builds confidence or not. It's what filters over in the end to more consumer spending. And then you get the 360 degree virtuous circle that feeds on itself that recoveries always need. Now, where we are right now, we're probably three quarters of the way through that, that tail going back up where initially it was, the relief packages that helped out with consumer spending. And then you had inventory rebuilding coming back up off of the manufacturing, a little bit of renaissance that went on, and now you're starting to see that pent-up demand cycle that really was pushed all the way to the left side in March, April and May. We like to call this a big workout process and the first phase of the workout process, in March and April, we all remember that was the liquidity. Liquidity that was produced by Federal Reserve programs that were re-liquefying particularly the fixed income markets, and then ultimately as that started to get up and moving forward, the equity markets. 

And then from there, you went from liquidity, you went into the bridge and the bridge was a, was about the relief packages, plugging the gap of income and small businesses. And then you shifted into a three phase recovery that we've long talked about that would be wavy in and of itself. And now we're heading into next year, post-election where you get more into the pent-up demand cycle.  Then finally, in 2022, we call it the new frontier. That's where you take the learnings from a very difficult time during the pandemic as states and other countries began to reopen. What did you learn from that as a company, as an institution, as an investor, as a household, as a small business that you're going to carry through and then ultimately come out and the other side, hopefully in a much, much better position.

Candace Browning:

Okay. Well, Chris, thanks for that. Ed, let's turn to you here. What do you see as the major differences and also the similarities between the two party platforms and how do you think those might shape the key priorities for both parties in the next four years?

Ed Hill:

Yeah, so Candace, so both candidates sort of are dealing with challenges with their own party as the platforms came together. In the case of Joe Biden, it's balancing the sort of more progressive left with the more pragmatic center-left Democrats. In the case of President Trump, it's sort of taking his unique brand of republicanism and balancing with more traditional republicanism that included some differences on issues like foreign policy. So, you know, some key areas of differences. In the case of, in the case of the Biden campaign, very interested in preserving the Affordable Care Act, very interested in more progressive tax policies and very interested in sort of a more multinational approach on foreign policy.

The Trump campaign, you know, focused more on less regulation, lower taxes, but again, sort of more unilateral approach to foreign policy. But there are some agreements between the two parties and the candidates as well.  Both have a mistrust of big technology companies, both want to use the power of government to harness pharmaceutical prices.  Both want to focus on developing a tougher position on China or implementing a tougher position on China. So there are some agreements, but there's a great deal of differences that oftentimes are somewhat traditional between the two parties.

Candace Browning:

Okay. Savita, this is a great point to get your take on the markets, which as we all know, haven't been following the same path as the economy. So what do you think are some of the key issues individual and institutional investors should be watching for? And also, do you think we could see more volatility both before and after the election?

Savita Subramanian:

Yes, Candace.  It's been a wild ride and the markets have been really been on a roller coaster this year that have, doesn't seem to have much to do with the economy. And we've seen a very narrow leadership in the market. So we've seen just a handful of big cap technology stocks drive the market higher this year. Now what's interesting is we are seeing a little volatility. We are seeing the signs of a rotation as we move towards Election Day. In fact, we are seeing some beneficiaries of potential infrastructure spending, or maybe a change in tax policy. Some of those factors are starting to influence the market.

Now we've also seen a demonstrable rise in volatility from the summer months to now. In fact, what's interesting is that typically the VIX, which is a measure of equity volatility, rises by about 30% from August to November election day. And we've actually seen the VIX increase by almost exactly 30% from August levels. So what we're seeing today is really true to form from an historical perspective. Now, I think that we could certainly expect even a little bit more volatility. And the reason I say this is if you look at things like the Political Uncertainty Index, which is a measure that was created by some academics to assess how uncertain election results could be, this indicator is just coming off of all-time highs.  Why that's important for the markets is that this indicator generally tracks volatility. So I think we could see a little bit of a catch up in volatility from here and more upside risks of volatility.

Now after the election, I think we could also expect to see a little bit more volatility, even though we've come beyond a point of certainty and where we could see it as around emerging policies. So if we start to see really strong signs that we are going to get an infrastructure spending package, I don't think that's priced into the market as of today and that could cause even more of a rotation, even more digestion of the market. So I think the name of the game is we need to get comfortable with volatility from here. It's something that's going to be a little bit elevated, even relative to the typical election year.

Candace Browning:

Well, thanks for that, Savita.  Let's turn to Ed now and start talking a little bit about the role of foreign policy in the election. And, you know, there are ongoing issues with trade and the U.S. China relationship, the UK’s transition to Brexit, the Middle East. So Ed, how do you think each of the candidates are approaching foreign policy and which countries or regions do you think might be affected most?

Ed Hill:

Yeah, so thanks, Candace. So, there is a unique sort of two different approaches among the two candidates to foreign policy. Donald Trump taking a sort of more, you know, “U.S. first” bilateral negotiations, “U.S. lead and see if others follow.”  And Biden I think has made it clear that he's more interested in a multilateral approach using multilateral institutions or forging coalitions of government to help benefit U.S. foreign policy.

So, in the case of the UK, for instance, while Donald Trump would very much like to get a free trade deal with the UK and so would Biden, in Biden's case, I think he's more also interested in considering European internal dynamics. So, for instance, they've made it clear that they are not willing to do a UK deal if somehow the UK goes back on the Good Friday agreement between the UK, Northern Ireland and Ireland, which is part of, part of the European Union.  On China, there actually is probably a little more agreement where both sides definitely want to be tough on China. They want to continue to press China, perhaps for different reasons. In the case of Donald Trump, he thinks its unfair economic conditions.  In the case of the Democrats, there may be some of that, but there's also a focus on human rights, particularly in Hong Kong, as well as in China and Taiwan. And so, the Biden campaign has said it's not their first choice to use these sanctions or these tariffs unilaterally that are similar to what Trump did, but they won't rule them out either.

And when it comes to the Middle East, I think there's no doubt that the Trump administration has put a much greater emphasis on the Middle East than Biden likely would.  You know, if Biden is probably focused, starts with Europe and Asia, followed by South America and then the Middle East.  For Trump, after Asia, it appears that the Middle East is his most important interest from foreign policy. And we've seen it, whether it be the bombing of an Iraqi revolutionary guard leader earlier this year, whether it be the, moving the embassy in Israel from Tel Aviv to Jerusalem, or whether it be in the recent deal that his administration brokered between Israel and Bahrain and the United Arab Emirates.  So much more focused in the Middle East for Trump administration that perhaps a Biden administration would have.

Candace Browning:

Well, thanks for that, Ed. So we've talked a little bit about volatility and foreign policy, but I also want to get your take Ed on how the voting process itself could play out in this election. I know this is one of the top questions that you've been getting from clients, and we've certainly all been reading about it quite a bit. So the question is, if there is a delay of several days or more in getting the final results, what rules or mechanisms will kick in at that point?

Ed Hill:

So, you know, as you point out 2020 could be a unique year in this way in trying to get sort of our results counted.  In 2016, we had about 40 million mail-in ballots, about 130 million voters. This year could be 80 million or north of that, out of perhaps, you know, 145 million voters. So a lot more emphasis on mail-in balloting, which causes some complications. In two of the key swing states that are going to be vital for determining the presidency, Michigan and Pennsylvania, they have rules that allow the ballots to be counted even if they are received after Election Day. And in the case of those two states and other states like Wisconsin, also a key state, there are lawsuits that could change that. So, can't even guarantee we know the rules are now.  But like I said, in the case of Michigan, it could be 14 days before all the ballots are even received, never mind counted.

There is a key date though that I want to point out, which is December 8th. So if folks think back to the year 2000, the Supreme Court of the United States ruled that Florida had to stop counting their ballots on December 13th of that year, 2000, which ended the Florida counting, made George W. Bush the winner of Florida and therefore the President Elect of the United States. That was because there's something called a Safe Harbor where states have to have their elections certified by that date.  This year, it's December 8th. So while I'm certainly not predicting it'll get to there, if we get to say December 7th, I would like to think that the courts would step in and resolve any confusions so that the ballots can be finalized in time for that December 8th deadline, so states can make sure that their electoral votes count towards the presidency.

Candace Browning:

Fascinating. Well, thanks for that Ed. So Savita, if we do see a delay in the election outcome, how do you think the markets might react to that?

Savita Subramanian:

Well, you know, it's a great question and as Ed points out, the probability of that happening is actually increasing. If you look back at what happened in 2000, I think from the date from Election Day until the Supreme Court ruling, the market was down about 5% and I mean, let's face it, the market doesn't like uncertainty and that would cause a bit of a selloff in stocks, most likely.  We've also looked at other headline risks and geopolitical shocks and we found that the typical peak to trough market reaction on headlines, on negative headlines, is about five to seven percent. So that's a reasonable way to contextualize this.

I think what's more interesting though is that typically when you see a market selloff on something that's not fundamental, that's just pure uncertainty and a negative headline, more often than not in the next three to six months the market more than recovers those losses. So I think that if we did see volatility around simply a contested election, that wouldn't necessarily be cause for alarm. And in fact, one might want to think about potentially adding exposure to stocks if that were the sole reason for downside.

Candace Browning:

Okay. That was great background to start with. So let's turn now to some of the economic and political changes that we could see depending on what happens in November. And Chris, I want to start with you.

So we know that government stimulus has been critical in stabilizing the economy and consumer spending, as well as supporting small businesses and helping people and families get through these really challenging times. Could we see, do you think some type of stimulus continue beyond this year? And if so, how might the election results affect the shape of that stimulus?

Chris Hyzy:

Yeah, this election in and of itself is very interesting.  I would say almost all elections are, but given everything we're dealing with right now, we're up two or three levels there on the interest side.  But to your question, Candace, this is where it really gets interesting.  And Savita talks about volatility coming in normally between August and the November end months during the year and then with election cycles, it gets picked up a little bit more, especially now.  Now with that as the backdrop and still the big wall of worry out there for investors, whether it be the U.S.-China relationship, tariffs coming in and going, raising taxes, another new fiscal package or not, all of that, put it in place, the factors in the market are more than likely to tell us what the higher probability events are going to be post-election. So we'll be looking at that very closely and Savita said this a lot as it relates to the different sectors and how they move.

Now, in terms of fiscal relief, another package, fiscal package number four, if that comes to be, which all press reports are now suggesting that it's coming, whether it's before election or not, we don't know. But let's just say it comes, it's one and a half trillion to two trillion on top of the 3.6 trillion before in the CARES package, on top of the six or seven trillion in liquidity.  Put all of that together, you're talking about in one year, potentially $11 to $12 trillion in fiscal stimulus and liquidity on a base of a $22 trillion economy, which is about 50% of GDP. And to put that in context, going back to the 2008 to 2012 global financial crisis, it was about 20% of GDP over four years. So we're two and a half times greater right now, as it relates to plugging the gap, filling the relief and then ultimately coming out on the other side of it, which by the way, is not likely to go away once we get back into full recovery mode next year and then on to 2022.

So it's absolutely critical to bridge from this current time where we are still worrying about a very difficult pandemic, getting through the election, coming out the other side and not just keeping businesses afloat that perhaps would never have made it anyway. It's about supporting a bridge to the other side and that's where this last fiscal package should be targeted to, in our opinion. And the market's going to actually weed that out well ahead of the turn of the year, like it did in March and in April when liquidity was first put in place, in our opinion.

Candace Browning:

Okay. So Ed, turning to you, there's various proposals for both tax and healthcare reform that are being proposed. So what do you think the likelihood is that we'll see progress in either one of those areas? And could you take a look at taxes first and then turn to healthcare?

Ed Hill:

Sure. So in the case of taxes, the Biden campaign has been very specific in what they want to do. They've proposed about $4 trillion in tax increases over, as measured over a 10-year period, according to the Tax Foundation, or about 1.4% of GDP. And they’ve broken that down in a number of areas, including looking at raising the corporate tax rate from 21%, where it was set under the Trump tax cuts, it had been 35% before that, moving that back up to 28%.  They've talked about increasing a corporate minimum tax and also about raising the taxes on the subsidiaries of U.S. companies operating overseas.  On the personal side, they're talking about higher taxes on those making over $400,000, raising the capital gains for those making over a million dollars and putting in new estate tax changes as well.

The Trump campaign, on the other hand, has been much less specific. Now to be fair to them, they were, you know, successfully passed the Tax Cuts and Jobs Act in 2018, so much of their tax policy has been implemented.  But Trump has called for further tax cuts for middle-class taxpayers and of course has vowed to defend his tax cuts in the event that a Democratic Congress tries to repeal it while he's, while he's still in office. 

On the healthcare side, you know, there's one area of agreement and that is pharmaceutical prices are too high and both sides want to use the power of government to lower pharmaceutical prices. But in the case of the Biden campaign, they really want to build on the legacy that Biden was involved with when President Obama created the Affordable Care Act, sometimes called Obamacare. And he wants to build upon that by establishing a public option. So not only would you be able to buy, have the choice of buying insurance from a private company, but also from an insurance unit run by the, run by the Federal government.

You know, if you look at polling, Democratic voters especially rate healthcare as the number one issue, ahead of the economy and even ahead of the COVID response. So, this is clearly going to be a priority of a Democratic administration. Republicans don't rate it nearly as high, Republican voters. And so while the Trump administration has talked about it, it doesn't maybe have the same urgency among their supporters as it does among the Biden campaign.

Candace Browning:

And when it comes to the ability to actually change taxes or anything else Ed, a lot is going to depend on the election outcome and whether one party sweeps the presidency and both houses of Congress or whether we'll see some form of divided government, which is what we have today. So how do you think the potential outcomes might affect the amount and the level of changes that we could see?

Ed Hill:

So we've seen throughout recent history that major legislative accomplishments in the fiscal area or the, or the tax area really haven't been done on a bipartisan basis. There was one exception in this at the end of Obama's first term, they extended most of the Bush tax cuts, not all of them. But other than that, most of the major legislation is done either under an all Democratic government or an all Republican government. So I think those changes sought by both sides are far more likely to be achieved if they are working with members of their own party in Congress.

I have a hard time seeing a, for instance, Republican Senate repealing portions of the Trump's tax cuts, even if a President Biden has asked them to.  I also have a hard time sort of seeing a middle class tax cut if, you know, if Biden, excuse me, if President Trump is dealing with a Democratic legislature of either chamber. Likewise the healthcare, they've not been able to agree on reforms there, with the exception of this pharmaceutical thing, very distinct views. So I think the best chance for action, at least major legislative action, is through one party control on either side.

Candace Browning:

Well, thanks for that Ed. So Savita turning back to you, what issues could matter most to the corporate sector and the profit outlook in the coming year, and also what sectors do you think could be impacted the most by the election?

Savita Subramanian:

So the impact of the election on the corporate sector is wide ranging and I think the easiest place to start is taxes. So thinking about tax reform and what we saw under President Trump with the major corporate tax cut, if you remember that contributed almost half of corporate earnings growth that we've seen since the tax reform package was enacted. So any reversal in the corporate tax rate would pose meaningful risks to corporate earnings. And I think that based on Biden's proposal that Ed Hill just laid out, we could see as much as an eight percent risk to S&P corporate taxes, just from reversing that corporate tax rate a bit higher.

Now on top of that, if you think about a potential for increasing the individual tax rate for the wealthy, we think that that could, and we've seen evidence of this in the past, that could have an impact on spending patterns. So typically when the wealthy are taxed at a higher rate, we see discount and lower price point retailers outperform luxury retailers, as you would expect. So intuitively it makes sense. And that's generally what you see in the market. So that could be expected under some kind of a hike in the high income tax rates.

Now moving from taxes to plans like infrastructure spending, here one of the big changes that we could see is a real cap-ex cycle. And if you think about it since 2008, we have not seen a cap-ex cycle. We haven't seen companies spend on refurbishing on plant, property and equipment. We've seen a lot of money spent on tech, but not a lot of spend elsewhere. So we think that any sort of infrastructure spending plan could benefit some of the old economy areas of the market like industrials or materials that could see a higher sales uptick from just a bigger activity on the cap-ex front.

On top of that, one theme that we've written a lot about in research and you've really led this effort is the idea of on-shoring and moving from a global economy to a local economy. Now, here I think it's important to examine the puts and the takes, because if you look at the S&P 500 overall over the last 20 years, it has been a big beneficiary of globalization. So if you look at margin expansion for S&P 500 companies, almost half of that margin expansion can be attributed to companies’ offshoring, to companies taking advantage of lower labor costs, lower import costs and lower tax rates overseas. So reversing that globalization theme into more local economies could potentially be negative for margins, at first.

Now, I think the other component of global to local shifts that our technology analysts have been writing quite a bit about is the idea that companies will be much more incented to automate their processes, because the cost of labor in the U.S. is still significantly higher than it is elsewhere. So thinking about this global to local shift, isn't just the idea that we're going to bring back jobs to America and we're going to create a little bit of inflation and a closed economy, but I think it's also the idea that companies will have more of an incentive to become efficient and automate a lot more of their processes. So lots of positive trends for both industrials and technology companies under this global to local theme that we've all been writing about.

Candace Browning:

Well, thanks for that Savita. Chris, let's turn it back to you, and I'm particularly interested in what you see as the potential election outcomes, you know, the impact that they're going to have on asset allocation, so stocks, bonds, cash.

Chris Hyzy:

It's a great question. There's a potential for a high magnitude of impact across asset classes and Savita set it up so well when she talked about potential future profit drivers, and that's what not only the equity market looks at, but quite frankly, all different kinds of asset classes look for pivot points. They look for new catalysts that have not been discounted yet, and the wildcards are still infrastructure and cap-ex and the big on-shoring movement that she talked about.

So let's just step back for a second and let's think about three areas of responses that this election could elicit as we get into 2021 and Ed talked about a few of them.  The first is what is the ongoing pandemic response? The pandemic is still with us. It's more than likely to still be with us as we head into in 2021, even with the rising potential of vaccines and better treatment.  What is the ongoing stimulus needed to get through into the other side, that's point number one.  Point number two, when we think about jobs, the areas that have been most harmed, travel, leisure, entertainment, how are they coming back at the same time?  Savita mentioned this before, factory automation, transportation, logistics, new jobs that are coming because of either on-shoring or infrastructure redevelopment plan. And last but not least, when you consider the other areas that are still coming back, that are dominated by the housing cycle that is still very early stages. So you have that. And then also the interplay between the different asset classes. The key is going to be what's the level of rates, the more the debt comes, the more there's a higher deficit and then ultimately do inflation expectations rise.

Now, our belief is core to asset allocation, which is if inflation expectations are rising and it's manageable and it's filtering into broader economic activity, that's good inflation, that's pricing power, that's higher revenues. That's a better profit cycle in and of itself. And with cap-ex, you can get productivity that limits inflation. What that should do in our estimation is a high magnitude impact on asset allocation in the next few years, where equities are attractive at this point relative to fixed income, but likely to get even more attractive. Because if you get a backup in rates, cash returns still stay sticky around zero, you get commodities, particularly precious metals, now become competitive with cash, like you've already seen with the rise in gold prices and to a certain extent silver prices.  But it's not about equities being the only alternative or there is no other alternative. It's about a free cash flow that equities can produce with or without tax changes relative to fixed income and absolute.

So we think investors should be not only considering vertical parts of their asset allocation underneath the equities but also horizontal. And that means raising your equity allocations overall, particularly during weakness going through the election when you could see volatility, as we have discussed, pick up.  Those are generally buying opportunities and we think it will be this time around.

Candace Browning:

Well, thanks, Chris. So we've covered a lot of ground here on what the key issues are in this election season and what the priorities are for both of the parties. Let's now take a look at what they might mean for us, these changes as investors and also what this election might mean for our financial lives.

So Ed, let me start with you.  When you think about the big issues on the table this election year, which ones could affect us most directly, as taxpayers or retirees and people with families or business owners.

Ed Hill:

So Candace, we've talked a little bit already about tax and healthcare, two important things, but, you know, Savita and Chris both touched on the importance of infrastructure spending. That actually is something that has broad bipartisan support and not only would be good for the economy, but also can meet, help address, you know, just some needs around roads and airports, wastewater treatment facilities, energy, those sort of things. So that I think is a really a big issue that almost election independent of, there's opportunity for support, even if the Republicans or Democrats control the various chambers or the White House.

Another important issue, there are issues around immigration, with different views on that.  The Trump administration being more restrictive, the Biden campaign, the Biden administration perhaps would be a little bit more open, but that affects sort of, obviously prices and jobs and just the way we live. And of course, racial justice issues, which really have been a top of mind, you know particularly among many in the Democratic Party and Joe Biden himself.

Candace Browning:

And Savita, how might the issues we've discussed here today, the pandemic and government stimulus, U.S.-China relations, how might those affect the equity markets both now and in the future?

Savita Subramanian:

Yeah, I think these are themes that have very long tailed impacts on equities. So if you think about the pandemic itself, I mean, we've seen and I think Chris has laid it out nicely. We've seen a recovery that's been driven more by liquidity and then by fiscal stimulus. And now we're starting to actually see a bit of a nascent pickup in economic activity, which is, you know, typically the way we see recessions end and recoveries begin. So that's all very positive. The path of the pandemic will determine the route and the acceleration in economic activity. So, you know, where we are seeing some signs of a second wave of COVID-19 cases, that I think is an important barometer to track and how the administration deals with that.

On U.S.-China relations, I think we've established that there is bipartisan support for essentially cracking down on China from a trade as well as a national security perspective. And I think those are trends that could remain in place for the foreseeable future. The direct and immediate impact could be felt within technology. And we've already seen a lot of changes around technology sales, distribution, gates around certain areas of the economy, that could continue. But I think that longer term, this is something that both sides of the aisle agree upon and that's likely to remain in our future.

And then thinking about again global to local, I think what that really is focused on is the idea that instead of relying on these intricately woven supply chains on a global basis, we need to simplify and think about local sourcing.  And in a way, this is actually very positive for the environment. So when thinking about this from kind of an ESG or an Environmental, Social and Governance perspective, a lot of the impacts around on-shoring are actually very positive for climate change. I mean, think about it, importing a can of tomatoes from Italy, which we all do and using our tomato sauce is actually five times the carbon footprint of buying a loosely packed carton of tomatoes from your local greengrocer. So a lot of what we're seeing around COVID and the impacts of the election and some of the themes that have been in place for the last year or so are actually very positive from an ESG perspective as well. So I think those are some of the longer term trends that we could see play through in the market over time.

Candace Browning:

Okay. Well, Chris, the last question goes to you and that is, what are some of the key things that clients and investors could be thinking about right now to prepare for the election and whatever the outcome might be?

Chris Hyzy:

Yeah, as we discussed before Candace, especially this year with the election, number one, with the pandemic as well and the whole geopolitical scene that has really picked up in terms of the uncertainty overall, heading into next year, it's really important to not only have that plan that you have in your portfolio and what you're trying to achieve, but actually reassess it right now.  And reassess it for the future environment, but also have your objectives change?  Simple questions like that. So you always start with the when, what is your timeframe? And Savita said long, many times, the longer timeframe you have, the substantially lower probability of loss that you have in your portfolio. So you start with the when and then lengthen that time period out through the election.  We've seen time and time again, many investors and clients have the very short-term mindset at this point when you have big events like the election.  Let's think through the election, let's think through next year and on through into the cycle, that's point number one point. 

Point number two, have that disciplined process, reassess the process to meet those objectives. Are you rebalancing three or four times when things are more volatile? Are you going to rebalance your portfolio if there is a contested election and things become on sale that are going to come out the other side through the big themes that we see in a better light.  Are you going to actually increase your equity weights, because now fixed income has become, in some cases, a hedge on your portfolio and not really a fixed income component like you're used to.  These are all questions you go through with your advisor and you sit down, you reassess the plan.  And most importantly, sometimes the best decisions are to ride through the most volatile times and getting through on the other side and not making too many drastic changes to your portfolio because potential policy changes.

And this is the last point. We've talked a lot about the potential for rising capital gains. If you really think about that, the essence of portfolio construction and when you rebalance has a lot to do with taxes and the efficiency of putting capital to work, while maintaining your objectives over course of your timeframe.  If that's the case, even if capital gains goes up, it's still important to assess the tax efficiency out there. And that tax efficiency starts with -- start and begin to think like you normally would about harvesting losses to match up again, against whatever gains you do have in your portfolio. So overall, timeframe, your plan, your process and act when the markets provide those themes and those companies and those managers and those other investments that are on sale that are going to fundamentally produce you the growth you need in your portfolio in the years ahead.

Candace Browning:

And on that note, we'll leave it there. Ed, Chris and Savita, thank you so much for joining me today and sharing your perspectives on this historic election season.  Whatever the outcome, I'm sure we'll be talking about it for a long time to come.

To all our viewers, we hope you found this conversation and the perspectives and insights discussed useful. We'll continue to monitor developments in the markets and the economy in these final days running up to Election Day. So please check back with us for regular updates as events unfold.

Thanks for watching.


All information is current as of the date of this recording and subject to change.

The views and opinions expressed are those of the speakers, are subject to change without notice at any time, and may differ from views expressed by Merrill or other divisions of Bank of America Corporation. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any service, security or sector.

Investing involves risk. There is always the potential of losing money when you invest in securities.

Past performance does not guarantee future results.


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The events and realities of today make this general election one of the most significant in recent memory.  Watch as expert panelists explore the issues shaping the election and share their opinions on how different outcomes could affect economic policy, the markets and economy in the months to come.

What the experts will cover:

  • Current state of the economy, the potential for new stimulus measures and the impact the global health crisis could have in the months ahead
  • Principal differences—and similarities—in the two major party platforms and what their key priorities are for the next four years
  • The role foreign policy is playing in this year’s election, including trade issues and growing tensions between the U.S. and China
  • What history tells us about how the markets might react in the lead-up to and following the election, and steps investors could consider taking now to prepare

Event panelists:

Candence Browining headshot

Candace Browning 
Head of BofA Global Research

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Ed Hill
Senior Vice President, Public Policy Executive,
Bank of America

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Chris Hyzy headshot

Christopher M. Hyzy
Chief Investment Officer, Merrill and
Bank of America Private Bank

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Savita Subramanian Headshot

Savita Subramanian
Head of U.S. Equity and Quantitative Strategy
and Head of ESG Research, BofA Global Research

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