Markets will be watching Biden 'rhetoric' on stimulus: Girard CIO

Tim Chubb Girard CIO joins Yahoo Finance and weighs in on latest markets news as a stimulus stalemate ensues and Biden announces Harris as VP pick.

Video Transcript

JULIE HYMAN: Let's talk about the perspective of the markets now-- not only on this VP pick, but also more broadly what's going on. Timothy Chubb is joining us now. He's the CIO, Chief Investment Officer, at Girard. He's joining us from Pennsylvania.

Tim, it's always good to see you. It looks like, you know, since this was sort of a conventional choice, as we just heard from Omar, pretty moderate choice. The markets are not terribly concerned about it, I guess. How are you thinking about the election?

TIMOTHY CHUBB: Yeah, you know, it's definitely been something that's on our minds, especially as we've heard a lot of conversation about tax reform, health care reform, and potentially starting to put pressure on some health care stocks. But I think the markets can be really focused on stimulus and how the potential Biden administration may respond to the COVID-19 crisis.

You know, ultimately the stimulus that we've been supporting the markets and the economy has obviously been substantial, with the S&P and NASDAQ closer, if not at, all-time highs. And so I think the market's going to be looking very closely at just what the Biden rhetoric will be around stimulus to continue into the new year, how, you know, we might have more of a federal role, I suppose, with combating this, whether it's, you know, federal mask-wearing and those sorts of things-- which, you know, could potentially get the economy back on its feet a little bit more quickly than how the Trump administration has handled things.

ADAM SHAPIRO: Tim, we had a guest in the previous hour talked about the threat of inflation and why everyone should avoid bonds like the plague, no pun intended. But if you jump into this market, where you point out that the broad market valuation right now, you're cautious, it seems to me you'd better have some kind of exit point established as you're looking at that, right?

TIMOTHY CHUBB: Yeah, exit point as far as the market's concerned-- you know, we're long-term investors. And so I think when we see technology stocks pull back like they have in the last couple of days, you know, with businesses that maybe are a little bit more sensitive to potential regulation from the Democrat-- you know, if the Democrats were to sweep and ultimately enact some of these things early on in their term.

Ultimately, we would look to try to pull back and get some of our favorite names during that time. You know, I feel like a record coming on over the last couple years and saying that, you know, there's a lot of secular growth tailwinds across many industries right now.

And so when we look at what's happened through COVID, I think a lot of these businesses that are benefiting from some of these trends continue to look even more attractive. The market has rewarded it.

And while there are some that are very expensive at the moment-- and we started to see the repricing take place next week, or last week rather. Overall, I still think, you know, for patient long-term investors who believe earnings will grow over time, stock prices should follow.

JULIE HYMAN: Tim, you mentioned stimulus a few moments ago in the context of the Biden campaign. Is your base case that stimulus does get done by Congress? And if it doesn't, the executive orders notwithstanding, how much of a risk factor is that?

TIMOTHY CHUBB: Yeah, I think the stimulus is a huge risk factor. When you look at personal incomes, you know, right now, or at least in June and July, they were actually $1 trillion higher than where they were at pre-pandemic.

So obviously, a lot of that is the extension and extra supplements that we've seen as far as unemployment insurance has been concerned. So you know, I think the stimulus is-- while the market has been spooked so far about some of the delay that we've had, you know, throughout August and some of these extra benefits getting passed, I think it's a risk to the market.

And you know, with so many Americans unemployed still, with the economy on fragile footing, I think stimulus is really important. I'm a fiscally conservative person, so of course, I don't like, you know, all this stimulus. But it's absolutely necessary, just as all the iterations of quantitative easing were after the global financial crisis, to keep this from becoming a financial crisis, and rather just a biological crisis that's been really unfortunate.

RICK NEWMAN: Hey, Tim. Rick Newman here. A few minutes ago, you mentioned some alternative public health approaches that might be more helpful in getting the economy back on its feet. What do you have in mind?

TIMOTHY CHUBB: Uh, public health approaches? I don't know much. I'm an investor, so I'm not so sure I'm--

RICK NEWMAN: Well, you said-- you referred to more mask-wearing, and different things that might just make it easier to get businesses reopened.

TIMOTHY CHUBB: Yeah. You know, you have to look at the data that we've seen throughout Europe. I know in the early goings of COVID-19, you know, countries like Italy have really struggled. Cases were increasing at a more rapid rate than we had seen in other countries.

But it seems to me that a lot of these other developed countries have taken things more seriously. Perhaps it's a benefit to them that they are more-- the country is not nearly as large and dispersed as the United States is.

And so I guess we've been fortunate to see that these flare-ups in the United States in the South and the West, a, have peaked, it seems, and also haven't become, you know, sort of a more substantial second wave.

But I think investors need to look at the costs associated with this state-by-state and very liberal view that's been taken with some of these public health responses. I feel grateful that in the state of Pennsylvania, I think we've handled things very well here and have taken more of a progressive approach towards mask-wearing.

But I think as investors, you have to look at the cost of having such a liberal stance on the national level and what that's costing the economy in the long-run.

JULIE HYMAN: Right, in terms of how long this is going to elongate the pandemic. Tim Chubb, it's always great to see you. Be well. Stay healthy yourself. Tim Chubb of Girard. Appreciate it.