U.S. mutual fund managers
brace for closer presidential election
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[November 05, 2016]
By David Randall
NEW
YORK (Reuters) - The U.S. presidential election is looking like less of
a certainty for Democratic nominee Hillary Clinton than it did a month
ago, prompting mutual fund managers to brace for more volatility by
raising cash and getting their buying lists ready for opportunities.
"The market has been pricing in a Hillary victory, and now with the
introduction of the Comey letter, there's a stronger possibility that
the base case doesn't happen," said Phil Orlando, portfolio manager of
the New York-based Federated Global Allocation <FSTBX.O> fund.
FBI Director James Comey wrote Congress last Friday that more of
Clinton's emails would be scrutinized as part of an investigation into
Clinton's use of a private email system while she was secretary of
state.
The benchmark S&P 500 stock index has shed nearly 2 percent since
Comey's letter was made public, and notched its longest losing streak in
nearly five years.
Orlando said his fund has been raising cash out of the possibility that
the market could fall as much as 10 percent from the all-time high of
2,193.81 it notched Aug. 15.
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And Orlando is not the only one. Lipper data released on Thursday showed
investors fled U.S. based stock and bond funds in the latest week.
Nearly $7.7 billion left taxable bond funds in the seven days through
Nov. 2, the largest weekly withdrawals this year by a wide margin, while
U.S. equity funds showed $3.4 billion in outflows.
His fund is now neutral to the market, he said, in order to guard
against the possibility that either Republican nominee Donald J. Trump
wins the election, or that Democrats win both the Senate and the House
in addition to the presidency, both of which outcomes would push the
market down at least another 5 percent, he said.
The market volatility has also caused anxiety for retail investors,
according to Phil Blancato, chief executive of Ladenberg Thalmann Asset
Management in New York, who has cautioned against overreacting to the
market movements caused by the election.
"I’ve had multiple people call us up to say 'let’s raise cash in my
account' because of the election," said Blancato.
"Having to talk them off a cliff is becoming almost comical at this
point because of the idea that suddenly the world is going to fall into
the ocean because Trump wins the election."
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![](../images/110516pics/busine71.jpg)
People sit outside the New York Stock Exchange (NYSE) during the
morning commute in New York City, U.S., September 15, 2016.
REUTERS/Brendan McDermid
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Terri Spath, chief investment officer at Sierra Investment Management in
Santa Monica, California, has been selling as the market's volatility
picks up, shifting more assets into emerging market debt and floating
rate loans that should be more "insulated" from the results of the U.S.
election, she said.
"We think it's going to be a tight race and we're willing to step out of
the way if volatility picks up," she said.
One area in which she has been buying, however, is infrastructure and
transportation related stocks that have dropped more than the broad
market, she said.
Both candidates have pledged to spend more on rebuilding bridges,
tunnels and other links, while the iShares Global Infrastructure ETF
<IGF.O>, one of the best proxies for global infrastructure stocks, is
down 4.3 percent over the last month.
Eric Marshall, a fund manager at Dallas-based Hodges Capital, said he
welcomed the sell-off because the U.S. market had been steadily rising
since February except for a short fall after the so-called Brexit vote.
He is drawing down his approximately 8 percent stake in cash to buy more
healthcare and consumer companies that have fallen over the last week,
he said, and is preparing to buy more should either Trump wins or the
Democratic party sweeps the election.
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"The Brexit blip was the last time when you could have made some money,
and we're ready to be opportunistic again," he said.
(Additional reporting by Chuck Mikolajczak; Editing by Bernadette Baum)
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