My name is Don Ellenberger. I'm Head of Multi-Sector Strategies at Federated Hermes.
How could the 2020 election impact corporate bonds?
At Federated Hermes, we're of course agnostic when it comes to politics. But, we recognize that the polls and the prediction markets are calling for a democratic takeover of both the White House and both Houses of Congress. That could be a headwind for risk assets, like stocks and corporate bonds, because taxes are likely to eventually go up, and government regulations will probably increase. But, counter balancing those two negatives, or the fact that the Democrats may well delay any tax hikes, given the current fragile state of the economy, the risks of additional tariffs that would inflame the trade war with China probably would diminish under a Biden presidency, and there appears to be bipartisan support for an infrastructure bill, which would add additional fiscal stimulus to the economy and help support the markets as well. And remember, too, that the Fed will continue to act as an automatic stabilizer. If things turn ugly after the election, the Fed will simply turn up the liquidity dial, and they'll continue to backstop the markets.
Disclosure: Views are as of 8-6-2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices. The spread is the difference between the yield of a security versus the yield of a U.S. Treasury security with a comparable average life. Federated Investment Management Company, 20-30359 (8/20)