Gridlock over new stimulus measures is the biggest catalyst for market volatility right now, a chief strategist says

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  • The lack of progress in reaching an agreement on US fiscal stimulus is the biggest “catalyst” of market volatility for stocks right now, National Securities’ chief market strategist Art Hogan told CNBC Wednesday. 
  • He said: “The No. 1 catalyst in this market causing the most volatility is the path of fiscal policy and whether we can get that out of the Beltway.” 
  • Hogan said markets are less concerned about the US election result. 
  • US president Donald Trump signaled an end to stimulus talks this week, but later called for a standalone bill to help the airline industry. 
  • Visit Business Insider’s homepage for more stories.

The gridlock in Washington DC between US lawmakers over a new economic stimulus package is the biggest catalyst for market volatility, rather than the upcoming election, National Securities’ chief market strategist Art Hogan told CNBC’s “Trading Nation” Wednesday. 

“The number one catalyst in this market causing the most volatility is the path of fiscal policy and whether we can get that out of the Beltway,” Hogan said. “We need more fiscal policy stimulus. We’ve heard that from the Fed. We’ve certainly heard that from economists.” 

US president Donald Trump ended talks between Democrats and Republicans until after the election on Tuesday. He later urged lawmakers to approve $1,200 stimulus checks for American taxpayers, small business aid, and direct assistance to airlines to prevent layoffs.

Democrats and Republicans have been stuck in a stalemate over the size of the next fiscal plan since July, although House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have signaled that they have made some progress in recent days.

But even though a full fledged fiscal plan is unlikely before the US election, markets watchers have been welcoming the prospects for a standalone bill for airlines which have been hit hard by the pandemic. 

Mnuchin tried cutting a deal Wednesday on additional assistance to airlines with Pelosi with the speaker telling Mnuchin to read a bill that Republicans blocked last week. 

Hogan believes fiscal stimulus is the key theme dominating Wall Street, and participants are now less concerned about the US election result. 

Read More: A $2.5 billion investment chief highlights the stock-market sectors poised to benefit the most if stimulus is passed after the election — and says Trump ending negotiations doesn’t threaten the economic recovery 

But he said a sweeping victory by opponent Joe Biden, in which Democrats took the White House and the Senate and retained control of Congress, would be the preferred result for stock-market investors.”

“I think the market participants certainly feel more comfortable with a [Joe] Biden presidency and even a blue wave,” he said. “The Democrats in the White House and the Democrat-controlled Congress probably brings more, not less, fiscal stimulus.”

Read More: Betting against the FTSE 100 netted traders £418 million in September. These are the top 5 most and least profitable short sells last month

Hogan expects a target range of 3,200-3,400 for the S&P 500 by year-end and said a new record high by the end of the year would not be out of the question. The index closed at 3,419.45 on Wednesday.

Hogan said: “With the certainty of the election behind us, we could break out from the top end of that and get to 3,600 by year-end.” 

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