Global equity markets rallied on Monday after major networks declared Joe Biden the winner of the US presidential election, and early analysis of a COVID-19 vaccine from a large US drugmaker showed promising results. Our Head of Equities Stephen Dover joined Brooks Ritchey of K2 Advisors to discuss what these two events could mean for certain commodity, currency, equity and fixed income markets, particularly in the United States and emerging markets. They also take a look at why “rotation” is the word of the week for many of K2’s hedge strategies.

Here are a few highlights from the conversation today:

  • “One new theme you’ll hear us talking about in equity long/short, as well as in macro, a lot of the managers are looking outside the US. They’re looking at some of the Asian currencies. They’re looking at some of the emerging market fixed income areas.“ – Brooks Ritchey
  • “Once you get the stimulus wearing off a bit, then you get back to corporate fundamentals. You get back to maybe a lagging scenario involving delinquencies, defaults and even bankruptcies.” – Brooks Ritchey
  • “We get the sense from talking to the [hedge fund] managers that they’re going to let this rally run for about five more weeks. Around mid-December, the talk is they’re probably going to see most of the good news priced in, whether it’s a vaccine, whether it’s earnings growth from third-quarter reports. And they’re going to start to rotate.” – Brooks Ritchey
  • “Certainly some incredible news today about the possibility of a vaccine. It’s probably positive for value stocks relative to growth stocks, and just positive for the equity markets in general, and perhaps positive for some rotation in markets outside of the United States.” – Stephen Dover

Transcript:

Stephen Dover: Very big news this morning from Pfizer about the vaccine for COVID, very positive results. The market has moved a lot.

It’s my great pleasure today to be able to talk about a whole category of assets, hedge fund assets and how they’re positioning themselves for the election, but also for COVID. Today, we have with us, Brooks Ritchey, who is the senior managing director of K2 alternative investments. Welcome, Brooks.