US Equities: Biden, Covid and Inflation

MICUK 2021: The past 18 months have been a real acid test for US companies, says JPMorgan’s Clare Hart

Holly Black 2 July, 2021 | 11:34AM
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Holly Black: Welcome to the Morningstar Investment Conference 2021. I'm joined by JPMorgan's Clare Hart. Hello.

Clare Hart: Hi there.

Black: So Clare, one of the things you were talking about in your session today is how last year was a real acid test for a lot of companies, how has that informed your portfolio.

Hart: So I think meaning sort of last year relative to the pandemic. So what we're always looking for is a quality company, and a quality business model, and a quality management team. And that's often -- it's a qualitative assessment. We get some numbers around it, you can look at the past acquisitions and that sort of thing, but last year, really tested the management teams, their business model everything. Because all of a sudden, everything stopped, literally. If you think about a game of musical chairs, as kids, the music stopped, and you really had a chance to see who had been investing properly behind the scenes. Who had you know, who really had a strong management team that in a crisis could take a look at the balance sheet and had been running it appropriately, or could make the adjustments to the business model quickly, to adjust for, supply chains, that we're slowing down, consumers that weren't coming to their stores. That's an acid test.

Black: So also, I think last time we spoke, there was a different President in the White House. So how have things changed under the Biden presidency. Has that changed your investments at all?

Hart: Well, Biden has been President for a bit now, but not you know, we still have -- we're still sort of seeing him trying to get his promises and his policies implemented. So we're seeing some progress on the infrastructure bill. But most importantly, I think directly so far, what we've seen is his discussions around things like health care, are very different from the previous administration. Previous administration wanted to roll back Obamacare, Biden, who obviously was Vice President, under Obama, or with Obama is looking to expand that. That's a dramatic, that's in about face. And so what we are looking at within health care, and this will not be a straight line. This is not simply, oh, this will get better, that'll get worse. It's going to be I think, over the next few years, as we see his hopes, and expectations and his campaign promises, as he tries to implement them. We're going to see lots of opportunities within health care, and it's going to move around within the managed care names, within the pharma names, within the device companies. This is where we're going to see if what he talked about can be implemented. And if it is, how will the publicly traded companies help sort of further his platform, because if they don't help, the companies won't be benefiting.

Black: And the last thing I want to ask you about big theme for investors at the moment inflation, and the U.S. seems to be leading the way on this in the developed world. How are you thinking about inflation?

Hart: I think, you know, just as a backdrop, inflation, we are seeing it, companies are talking about it. And it can work in our favour. In some of the consumer names, for example, consumers, part of the inflation is coming from labour, and unemployment rates are down. So that is sort of pushing its way into the stocks. So that's great. Our companies can take price and they can get the price. But we want to watch because inflation that runs, they talk about the Fed running things too hot, and we don't want to see sort of inflation get ahead of what companies and people can afford, so to speak, because that's when you really put a crimp on spending and things could really become difficult. So within our portfolio, we have again allocations to the consumer. We have allocations to the financials, where we think we can benefit from inflation, but it's something we watch.

Black: Fantastic. Clare, thank you so much for your time. For Morningstar I'm Holly Black.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Holly Black  is Senior Editor,


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