A major Wall Street firm just boosted its exposure to stocks.
According to Federated Hermes chief equity market strategist Phil Orlando, the firm increased its asset allocation to 3% from 2% hours after Election Day due to a more favorable environment.
“We’re pretty comfortable that the risk of a blue wave, if you will, was off the table,” he told CNBC’s “Trading Nation” on Friday. “So, we made a decision to add a percentage point to our overweight in equities.”
The firm funded the move by decreasing its overweight cash position, which is now back to neutral.
“We thought it was an appropriate time to throw another log on the fire,” said Orlando, who oversees almost $615 billion in assets under management.”[We] specifically added a tick into domestic large cap value which we think fundamentally will do better as the economy continues to gain steam.”
The shift may not sound significant, but he contends it takes a major catalyst to move the needle on strategic positioning, and it typically only happens three to four times a year
Orlando believes both the political and economic backdrop supports an S&P 500 run to at least 3,800 over the next 12 months. On Friday, the index closed at 3,509 — about 2% away from the all-time high.
“The jobs report in October was terrific,” he added. “We’ve probably clawed back half of the deficit in the labor market from that April trough.”
Orlando is also more comfortable with the outlook to control the pandemic than he was a month ago despite the spike in coronavirus cases.
“You’ve got a divergence between the spike in infection which is undeniable. But mortalities remain very low. And, that divergence is important,” Orlando said. “Additionally, we’re making very strong progress in the vaccine.”