Eric Beiley, executive managing director of The Beiley Group at Steward Partners, spoke with Quartz for the latest installment of our “Smart Investing” video series.
Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): The presidential debate was last week and Democrats are kind of scrambling. Biden says he is gonna stay. Do you see this affecting the market moving forward?
ERIC BEILEY (EB): The reaction in the markets was muted. It’s obviously getting a lot of press time. I think as time goes on, we’ll see. As we get closer to the election, I think that’s when we’re gonna see bigger impacts as both sides weigh what their policies are gonna be fiscally and the impacts that could have on monetary policy, fiscal policy, interest rates, all those big issues that affect the markets.
AM: If Trump won, does that change the picture for rates or anything like that?
EB: Yeah, Trump’s clearly indicated he would bring in a new Fed chairman and lowering rates would be a priority for his administration. And so lower rates are positive for lots of financial assets. I think in the short term it would be beneficial. I think you’d see asset prices rise, equities be good for fixed income, possibly real estate, but longer term it really depends on the broader policies. And so that is to be determined. That’s an unknown.
AM: So there was an Op-Ed in The Times that said a second Trump term could be bad for the economy. Do you agree with that?
EB: I don’t like to swing one way or the other, but what I will say is that some of Trump’s policies are concerning, right? Especially his tariffs where he is a very big proponent of implementing large tariffs on imported goods from China. And that’s an inflationary sign, right? If you’re gonna put a 10% tariff, that product’s going to obviously cost more and that’s going to impact US consumers. And so at the same time, he wants to reduce interest rates, but on the other hand, implement these tariffs, which are inflationary. That’s going to trigger some problems. And that’s a concern, right? I think the markets would not react favorably to that. So I think that we’d like to see a more concrete fiscal plan from Trump that’s not yet there. And so again, to be determined, we’ll see what, as we get closer, if they talk more specifics and the markets will certainly react favorably or negatively based on that,
AM: There’s this very careful soft landing that they’re attempting to engineer. And then something wild coming in, that isn’t quite as nuanced, could really affect the markets.
EB: Yeah, the markets don’t like the unknown, they don’t like uncertainty. The markets are a leading indicator, right? So they’re trying to predict what it’s going to look like six months, 12 months from now. And so right now the markets are comfortable. They like what they see, they like what Powell has done. They like the economy. Right now we’re seeing that stocks are being rewarded, investors are being rewarded for investing in stocks. And if a new administration comes in and they implement a lot of sweeping changes, that creates uncertainty. And I think the markets would react probably negatively to that.
Read more: Tesla stock might earn back its spot in the ‘Magnificent Seven’
AM: So far this year, the Magnificent Seven’s done a great job at carrying the load for the market and moving things higher. Do you think that that will also continue?
EB: In one respect, it’s incredible, right? These handful of stocks have produced just immense returns. Nvidia obviously is the one everyone talks about up double over a hundred percent year to date. And returns over the last three, five years are staggering. It’s the largest market cap company, but the returns are very narrow based, right? If you look at the markets, these handful of stocks, Nvidia, Meta, Alphabet, Amazon, Apple, have produced the majority of the return in the indexes. And that’s concerning because if we do see a slowdown or we do see some weakness, and we’re gonna get some indications in the next couple weeks, second quarter earnings are coming out, and that’s gonna be very important. These companies need to continue to produce strong revenues, earnings to keep this momentum going.
AM: It seems risky to have so much of the work being done by so few companies.
EB: Obviously investors are continuing to put money into these names, right? If you look at the returns, any type of dip or or weakness in these names are met with a lot of buying, buying on those dips. And we continue to see it. Nvidia announced a 10-for-1 split. The markets love that. Broadcom, another of the big Mag Sevens involved in semiconductors, just announced a split. Their stock is hitting new highs it seems every day. And so investors are being rewarded, but on the other hand, the valuations for these companies are extremely high and so the risks are there. You gotta be prudent when you invest in these companies.
AM: So what sectors are you hot on in the second half?
EB: Clearly, technology is where the returns have been, so you have to stay invested in there because it’s just been such an incredible producer of results and returns. I do like healthcare over time. In a Trump administration, clearly [there would be] less regulation and that’s a big positive for the healthcare sector. You look at the demographics of our country, the aging population, needs for healthcare, drugs, all those things, is very positive. So I like that sector if interest rates come down, right? So the interest rate-sensitive sectors I like as well. Financials, utilities, they’ll do well in a lower rate environment.
AM: Tech, healthcare, financials, utilities. Thank you very much, Eric for joining us.
EB: Sure, thanks for having me.