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Pro explains how to position your portfolio for midterm elections

on Nov 8, 2022
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  • Amanda Agati says midterm elections could be a positive for markets.
  • She still recommends that investors stick to a defensive portfolio.
  • The benchmark S&P 500 index is up more than 1.0% this morning.

S&P 500 is still lingering about 20% down versus the start of the year but the midterm elections could be a positive for the markets, says Amanda Agati – the Chief Investment Officer at PNC Asset Management.

Agati says markets like gridlock

Agati is constructive since she’s expecting the midterms to end in a gridlock that has historically been good for the markets. Speaking this morning with the folks at Yahoo Finance, she said:

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Markets love gridlock; markets love stability and calm – that change of control so that we can’t have too many negative policy surprises. I think we could breathe a sigh of relief for some stability coming out of Washington.

She quoted several guideposts, including economic data, polling data, and even market performance to reiterate that everything is pointing to a potential change of control.

The benchmark index is already up 1.0% this morning.

Agati recommends playing defensive

Nonetheless, Agati expects the markets to ultimately continue acting as a function of what the U.S. Federal Reserve does.

She, therefore, recommends that investors stick to a defensive portfolio considering Chair Jerome Powell last week ruled out the possibility of “pausing” just yet as Invezz reported here.

We’re still very much playing defensive. So, U.S. over international, large cap over small cap, we’ve neutralised our growth vs value bet. And then, cash as an asset class is starting to look interesting for the first time in 10 to 15 years.

That last bit about cash, though, was in stark contrast to Ron Baron. The legendary investor, just a day earlier, said valuations had come down enough to go all in in the stock market (source).