Financial Market Update Amid Economic and Election Turmoil

Scott Knapp, managing principal of CUNA Mutual Fiduciary Consultants
Scott Knapp, managing principal of CUNA Mutual Fiduciary Consultants

What should credit union CFOs and long-term investors in the financial markets do in the aftermath of the U.S. presidential election? And how will national economic policies change based on the election’s outcome as November passes?

These were two key questions posed by breakout session speaker Scott Knapp, managing principal of CUNA Mutual Fiduciary Consultants. Knapp spoke during the fourth day of Virtual REACH 2020 (Nov. 4).

For financial markets in the near-term, it could be “completely and utterly uncertain and unreliable” for credit unions’ investment portfolios. However, investors can assign probability to a range of future financial-market scenarios. And credit union CFOs that monitor the bond and stock markets should take note of important trends right now that are connected to the economy, businesses, consumers, and ultimately deposits, liquidity and investments.

“For large-cap growth stocks and COVID-stock winners, their equity recovery in the market is most likely already priced in,” Knapp said. “But the economic recovery has decelerated in pace and faster growth is required sometime soon to keep recent strength in the equity and financial markets. Will there be more congressional stimulus? The hope is ‘yes,’ simply for stabilization of these financial market gains to move forward.”

He said to be cautious in watching the equity markets, because many publicly traded companies are “COVID losers” and “could be on their way out.” These companies are not setting the stage for their own recovery.

Regarding the 10-year Treasury bond, it’s expected to stay in a lower range over the near to medium term.

And what about the economy related to the financial markets? “We are starting to get some indications of healthier fourth quarter 2020 profits in the S&P 500 going into late 2020,” Knapp said. “And for third quarter earnings, corporate profits are pretty soft but they are nowhere near the expectations estimated earlier this year. They are really strong.”

He added: “Financial markets could worry about a contested presidential election, but I just don’t see it. However, if we do have one, that could be a negative surprise.”

His breakout session was one of a couple, in addition to more REACHtalks and Spark Sessions that same day on “Payments Transformation: The Movement to Instant Payments,” “Digital Convenience: Creating a Connected Experience,” and “Data Analytics in Action.”

You can watch Scott Knapp’s session and also catch the entire conference in real-time or on-demand! Click here to experience this exclusive virtual conference on Oct. 26, 28 and 29, and Nov. 4 and 5. REACH 2020 is one of the credit union industry’s premier annual events, drawing leaders and system partners from across California, Nevada and the United States.

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