For someone who worked at the White House, albeit just for 11 days, Anthony Scaramucci has a surprisingly contrarian view about election-related market risks.
"I think it's sort of a toss-up between the two candidates as it relates to the stock market," said Scaramucci, founder of the $7.5 billion hedge fund SkyBridge Capital, in an exclusive interview.
His view that election-specific risks are negligible for investors runs counter to the reams of guidance that Wall Street strategists have published in recent months to help investors prepare their portfolios. From stock lists geared towards either candidate's victory to scenario planning for a contested outcome, experts are providing specific advice.
Scaramucci hinges his view on his belief that regardless of who wins, the administration-in-charge would prioritize fiscal stimulus.
"Any of these two administrations is going to be looking to further stimulate the economy and to further encourage the Fed to induct more liquidity, and to create a softer or as soft of a landing as possible," he explained.
The Federal Reserve's policies will not change in the near term regardless of who wins and neither is the economic policy likely to change, Scaramucci said, evoking the continuity of economic policy the Obama administration practiced after taking over from the Bush administration in 2008.
"I think the Biden administration will do the same thing. People are saying the Biden administration will raise taxes; I don't believe that's the case," he said. "I think the economy is just too anemic to raise taxes. That's not to say that it couldn't be raised after the economy heals, but even in the Obama period, it was impossible basically to raise taxes until the economy healed."
Risks after the elections
While election risks are not an apprehension to the former White House communications director, there is cause for concern because the US has become a "poorer, weaker and sicker" country under the Trump administration, Scaramucci said.
"Our allies and our relationships with them have been frayed and he's hurt the trade balance," he said. "You've got the COVID-19 situation, which I think just based on empirical data and comparative analysis, you'd have to say that there have been flaws in the administration's decision-making."
Even though President Trump has repeatedly boasted about stock market rallies during his tenure, Scaramucci said the market is not an accurate measure of his success. Only 52% of American families are invested in the stock market through their 401(k) plans or retirement accounts, according to the Pew Research Center.
"If you look at the unemployment data, it's worse than it was during the Obama administration. We have 200,000 people now dead from COVID and we're closing in on seven million people infected with the disease," he said. "The GDP is down, unemployment is up. And so the Fed has helped to prop up the stock market, there is no question about that."
Taking all these factors into consideration, Scaramucci, who usually goes with the political betting markets, has made his prediction
"I think that Joe Biden is going to win," he said.
Navigating market sell-offs
Aside from his political presence, Scaramucci, who founded SkyBridge 15 years ago, is also responsible for the marketing and sales, compliance and regulatory affairs, as well as other management duties at his firm.
He leaves all investment decision-making to co-chief investment officers Raymond Nolte and Troy Gayeski but helps to connect the dots when needed.
For example, when billionaire investor Steve Cohen's Point72 Asset Management opened up some capacity during the COVID crisis, Scaramucci believes that his "personal friendship" with Cohen helped SkyBridge secure a spot in the fund.
He is upfront about the underperformance of the firm's flagship fund of funds but he asks investors to stay patient. The fund was down 24.7% in March and had significant redemptions in April.
"I've always been a long term practitioner of a well-diversified asset allocation plan so I try to tell people to stay the course," he said. "Unfortunately, some people invest emotionally, so they redeem after a bad performance."
The fund of funds generated an estimated 0.74% net return in the first half of September while the S&P 500 total return index was down 2.75% during the same period, according to an investor letter dated September 17. Though to be sure, the fund was still down 15.50% year-to-date, according to the letter.
"The worst time to be selling us was on April 1," he said. "Our stuff was so oversold technically in March and therefore we think that we have a great opportunity to see lots of upside from here."
Despite the recent volatility, Scaramucci is "long-term positive about the stock market." He said SkyBridge is already reactivating its plans to launch some new products, including a fintech offering, in 2021.
However, he is far from stress-free about the market where his biggest concern lies in the so-called FAANG stocks driving the entire market performance.
"I think that's a cautionary tale for people to be careful because you can get whipsawed pretty quickly," he said. "These markets are moving like lightning. The month of March to me felt like the entire 18 months of the 2008 financial crisis happened in about 6 or 7 trading days."
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