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- JPMorgan adviser Colleen O’Callaghan told CNBC’s “Trading Nation” Thursday that she is telling her clients to reduce their exposure to equities and hold more cash due to the fiscal stimulus gridlock in Washington.
- O’Callaghan, who advises high-net worth customers said: “We really need to see that stimulus package. If we don’t see that stimulus, I do think there’s going to be more volatility and we need to prepare for that.
- She said she plans to employ the cash once there is greater clarity on the US economic recovery.
- A Biden victory won’t necessarily be bad for markets, as increasing corporate taxes won’t be his first priority, she said.
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JPMorgan adviser Colleen O’Callaghan told CNBC’s “Trading Nation” Thursday that she is recommending clients to reduce their exposure to stocks and hold more cash as a fiscal gridlock in Washington shows little signs of abating.
O’Callaghan, who is managing director and financial advisor at JPMorgan Securities and oversees roughly $3 billion assets according to CNBC, said she is increasing cash exposure for ultra-wealthy clients.
“What we’ve been working to do is to reduce some of that equity exposure — sit in cash perhaps for a little bit,” she said. “We really need to see that stimulus package. If we don’t see that stimulus, I do think there’s going to be more volatility and we need to prepare for that.”
Republicans and Democrats have been at loggerheads over the size of the next fiscal stimulus package since the summer. A number of high-profile strategists and fund managers have said the uncertainty remains one of the key catalysts for market volatility right now.
House Speaker Nancy Pelosi and US Treasury Secretary Steven Mnuchin spoke on Thursday and the White House sent mixed signals on whether it will support a more comprehensive relief package.
President Donald Trump and Pelosi both said broader stimulus talks are back on Thursday, only two days after the president abruptly ordered Mnuchin to stop negotiating with Democrats.
Trump called for a standalone package earlier in the week to help airlines which have been hit hard by the pandemic, but Pelosi ruled out an airline bailout without a wider stimulus deal.
The House backed a $2.2 trillion Democratic stimulus proposal last week but this is unlikely to get approved in the Senate, where Republicans have a majority.
O'Callaghan said once there is greater clarity on the future direction of the economy she plans to allocate the cash.
"Certainly, we want to take advantage like we did in March," she said. "We are looking at the markets since the March 23 lows...markets have rebounded so nicely."
When financial-market turbulence, or economic uncertainty, is high, investors often liquidate assets in favor of cash, the ultimate safe-haven asset.
The S&P 500 is up almost 60% since touching multiyear lows in March when the coronavirus-induced slowdown began.
O'Callaghan said part of the markets remains "robust" despite the lack of stimulus due to a theory that Democratic opponent Joe Biden, who is leading Trump in the polls, won't be focusing on increasing corporate taxes immediately if he wins the election.
"We have 8.7 million people unemployed, we have a pandemic we need to take care of, we clearly have a lot of volatility," O'Callaghan said. "He is going to have a lot of wood to chop. As a result, taxes are not going to be his first priority right now."