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JPMorgan Chase News – Policy implications of the U.S. election

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JUSTIN PAGE:

It was a tight race, but the Saturday after Election Day, the Associated Press named Joe Biden president-elect. With a Biden administration and a possibly divided Congress, what effect could this have on the markets?

Joining us today is Meera Pandit, market analyst on J.P. Morgan Asset Management's Global Market Insights Strategy Team. Meera, before a winner was even announced, markets were up. What does this say to investors?

MEERA PANDIT:

That's right. The week of the election, markets ended the week up 7.3%, which would have been a good return in an entire year. And I think that what that says to us about the nature of markets in general, and specifically with regards to this election, is that markets don't like uncertainty. And in this case, the election results did reduce it even if we didn't have final, final results by the end of that week.

And I also think that given the fact that the outcome was pointing to a divided government, markets reacted positively for two main policy reasons. I think that divided government does temper the potential for massive policy changes. So it does take things like major tax reform off the table. And certainly from a fiscal perspective, even with the divided government, we are still expecting some sort of fiscal stimulus to follow.

JUSTIN PAGE:

We are still in the middle of a pandemic. Fiscal package discussions are on the table but at an impasse. Under a Biden administration, what could we see in terms of new aid?

MEERA PANDIT:

I think that although discussions have been at an impasse over the last couple of months, a lot of that does have to do with the election. So without the spotlight of the election looming, I do think that both parties will come to some sort of compromise based on some of the areas they agree upon.

So I think some of the things you potentially could see in a fiscal package would be expanded and enhanced unemployment benefits — maybe not that full $600 we saw from the CARES Act, but certainly some sort of supplement — small and medium-sized business loans, potentially a little bit more support for state and local governments.

And I do think that even if the fiscal package is a bit more modest, it should still be a huge help to households and businesses. Because essentially what we've done is we've built about half of a bridge here. And we need to build that other half of the bridge, in terms of fiscal support, to get households and businesses to the other side. And I do think if you find that fiscal support starts to fall a little bit short, you may see the Federal Reserve step in and be even more accommodative from a monetary policy perspective.

JUSTIN PAGE:

Health care, climate change and taxes were all major discussion points during the campaign. If Congress stays split after the runoffs in January, what changes could people expect to see?

MEERA PANDIT:

Well, major legislative change is going to be tough without some bipartisan support. So in the absence of that, I think that there is a limited scope for major tax reform, for major changes to the Affordable Care Act, and perhaps less scope for some of the clean energy initiatives that Biden had proposed on the campaign trail.

That being said, I do think that Biden can still achieve a number of things through executive orders. And a lot of that, in terms of scope, will rely on regulation and foreign policy. So from a regulatory standpoint, I think you could see some more reregulation of the energy sector. I also think you could see us potentially rejoining the Paris climate accord.

JUSTIN PAGE:

Let's shift to foreign policy. How might U.S.-China relations change under a Biden administration?

MEERA PANDIT:

I think Biden will still be tough on China. We've seen a lot of bipartisan support for having a "tough on China" stance. But I do think that the policy outlook will be a little bit more predictable. And I think that's important from a market perspective because — just to bring it full circle — markets do not like uncertainty.

And we did see a lot of uncertainty in 2018, 2019 around U.S.-China trade tensions and the headlines. And that did foment some market volatility. We also saw that it was an uncertain time for businesses. I mean, it makes it hard for businesses to make investment decisions, spending decisions, hiring decisions if the rules of the game are subject to change. And that makes it difficult for them to interact with suppliers and subsidiaries. So I do think that with Biden, you'll potentially see a more predictable approach from that perspective and probably a more multilateral approach with some of our key allies.

JUSTIN PAGE:

A lot to watch. Meera, thank you so much for joining us.

MEERA PANDIT:

Thank you for having me.

JPMorgan Chase News – Megatrends Driving Future Growth

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JPMorgan Chase News – Megatrends Driving Future Growth

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KIM MORTON:

The COVID-19 pandemic has significantly strengthened and accelerated many megatrends that were around even before that — from healthcare innovation to technology.

We have Anastasia Amoroso here. She’s the head of Cross Asset Thematic Strategy at J.P. Morgan Private Bank.

ANASTASIA AMOROSO:

Thank you, Kim. Good to see you.

KIM MORTON:

Anastasia, what is a megatrend? And are we paying attention to them now more than ever?

ANASTASIA AMOROSO:

We definitely are paying more attention to the megatrends. And the way that I would define a megatrend, it is a durable trend that is set to change and shape and disrupt the world as we know it not only for the next couple of quarters, but for the next several years. So we're not talking about trades here, but really trends that are going to develop and take hold over the next three, five and maybe even 10 years.

And so there's three megatrends that we focused on in particular this year, which is digital transformation, healthcare innovation and sustainability. And if you think about what's taking place this year with COVID, not only have those trends been very top-of-mind for people, but they've been significantly accelerated by the COVID pandemic.

And the reason why we care about them, Kim, is because a lot of the companies and a lot of the sectors that are tied to these megatrends are able to grow their earnings, grow their revenues and generate above market/above benchmark earnings growth, and hopefully, therefore, market returns as well. We're certainly seeing that this year and we think there's more to come.

KIM MORTON:

Let's talk about healthcare. There's been a lot of disruption during the pandemic but there’s also been a lot of innovation. What are some of the new and exciting developments you're seeing?

ANASTASIA AMOROSO:

There's a lot going on in healthcare. The speed of innovation and how it's accelerating that's really the key development in healthcare. So this is happening for two reasons. First of all is our in-depth, advanced understanding of human genomics, which we've not had before.

But now, we can sequence the human DNA in less than 24 hours, and we got the genetic code of the virus, really, in a matter of weeks. So that's really the first breakthrough. The second breakthrough is the artificial intelligence and how that could be applied to the data in healthcare.

So when you combine the two — the understanding of a human body or a virus on a very genetic, molecular/cellular level — and when you combine that with the ability to compute a lot of data, what you can do is get to the breakthroughs that much faster and potentially have a lot more treatments to explore than you would have otherwise.

So this has given a runway to a lot of breakthrough technologies in healthcare that we're excited about. For example gene therapy, which is the ability not only to treat but potentially cure some of the genetic diseases. Then you got also cell therapy, which is often applied to cancer treatments and developing targeted cancer treatments that allow you to take a patient's cells, reprogram them such that when they go back into the patient's body, they can actually destroy cancer.

And then the next frontier in healthcare, which has also been spotlighted by COVID, is this notion of precision medicine. We should be developing treatments that are the right treatment for the right patient at the right time. So we believe that the future of medicine is personal.

KIM MORTON:

I love that: “The future of medicine is personal.” What about forecasts for technology? For example the push for 5G on our cellphones?

ANASTASIA AMOROSO:

Well, technology transformation, the digital transformation, has also of course been accelerated by COVID. And there's exciting trends like 5G, artificial intelligence, obviously developments in fintech. But for the last three years or so we've spent building out the 5G infrastructure, which allows us to potentially have mobile speeds that are a hundred times faster and latency that's quite a bit lower.

Well, what's the big deal about that? The big deal about it is first of all, we can download our movies faster. And that's why we're looking forward to the launch of the 5G smartphones. And we think we'll double the number of them that we buy over the next year. But the really big thing about 5G is that this is a key enabling technology that allows many other technologies to take off.

Whether it's connected cars, whether it's large-scale factory automation or augmented reality. So clients often ask, "What is the killer app for 5G?" And I think we'll see that materialize next year. And we'll see it develop into what I call “the factory of the future,” which is factory run on 5G by robots and cobots that is producing everything automatically and digitally.

KIM MORTON:

And of course a hot topic, as evidenced by the election cycle, is clean energy. What could this mean for investors?

ANASTASIA AMOROSO:

Clean energy has been the spotlight in the markets this year and it's performed really well, I think, in anticipation of what's to come around the election. This is not only about politics here, those performances. This is also about the economics of clean energy. So regardless of the election outcome, when we look at the cost of electricity produced with wind and solar versus that produced with natural gas and coal, we see those costs of electricity converge.

And in fact, over the coming year, it's likely that it'll be cheaper to build a new wind and solar electricity capacity than to run an existing coal plant. So this is a true inflection point in clean energy. And so yes, the government push towards clean energy globally is certainly helping, but also the favorable economics means that utilities are increasingly converting to renewables and clean energy. But even more important, is consumers and corporates. So if you look at the corporate commitment to renewable energy, it has grown significantly. You now have more than 242 companies worldwide that have committed to either carbon-neutral or 100% renewable targets. And that, I think, is what's ultimately going to drive this renewable energy evolution, combined with the consumer. And I think that's why some of those renewable energy companies may continue to surprise to the upside.

KIM MORTON:

Well, Anastasia, this has been great. Thanks so much for joining us today.

ANASTASIA AMOROSO:

Thank you, Kim.

JPMorgan Chase News – Megatrends Driving Future Growth