BlackRock Future Forum

U.S. 2020 Election Special: What to Watch

Leading Republican and Democratic voices discussed key strategic and policy implications, and insights into the 2021 governing agenda. BlackRock’s leading investors also shared their best investment ideas informed by the election insights.

Election insights from across the aisle

Kate Fulton, BlackRock’s Head of U.S. Public Policy, is joined by three leaders who are helping to shape the 2020 election. Ronna McDaniel, Chair of the Republican National Committee, and Guy Cecil, Chairman of the Democratic Super PAC Priorities USA, share their thoughts on election strategy and party priorities. And Larry Hogan, Governor of Maryland and former Chairman of the National Governors Association, explains why real solutions require both parties to unite behind common causes.

  • Ronna McDaniel & Kate Fulton

    Kate Fulton: Thank you, Zach. My first guest is Ronna McDaniel, Chairwoman of the Republican National Committee. Thank you so much for taking the time to speak with us today at such a critical time for you and the campaign. As chairwoman of the RNC, you have such a broad responsibility for not just the presidential race, which we hear most about, but also for the Senate and House races across the country. So we wondered: How are you allocating resources across all those priorities during the home stretch?

    Ronna McDaniel: Well, thank you so much for having me, Kate. I really appreciate it. Thank you, all, for joining us today. And thank you for that great question. I view the RNC as kind of the hub of the Republican Party. We support candidates, like you said, in the Senate, the House and, obviously, the presidency this year. And there's a variety of ways in which we support the whole ticket.

    First is our data. Our data has seen an overhaul since 2012. We've invested over $300 million in our data, and it is really our compass as to how we interact with voters. It creates a guideline as to what voters care about, and we can customize a one-on-one interaction with a voter based on the issues that matter to them.

    We give that data for free to all the candidates. There's no cost associated with that. It helps with our whole ecosystem that we're able to give that to them. I'll just give you an example [at] how important that data is. When you're knocking doors, you don't want to be knocking the door of a high-propensity Democrat voter. So that data allows you to know: Where are your target voters? What homes are they in? And what message do you take?

    I always say I'm so happy when a Democrat knocks my door because I know their data is wrong, first of all. And then I bring them in for coffee and lunch and dinner so I can take them off the doors the rest of the day. 

    The second is we created a new platform since I've been RNC chair called WinRed. This is going to be our anecdote to ActBlue, which the Democrats have had for over a decade. It is a fundraising juggernaut for them. We really needed a small-dollar online fundraising platform to help our candidates, and this is the first time we've had this. In just a year, we've raised over a billion dollars on this platform. It took WinRed a significantly longer time to reach this threshold. So that's an asset we're giving to them.

    And then finally, the ground game. The ground game turns out all the voters. So we now have 2.5 million volunteers that we have trained and activated. It is larger than the Obama historic ground game that he put together in 2012. This is our door knocking, our phone calls -- all these things we're doing to drive out the vote. And it helps every candidate up and down the ticket, from House, Senate, to president. It's such a huge asset that we bring to the entire ecosystem of the Republican Party, and that is what the RNC has really focused on since I've been chair.

    Kate Fulton: That's great. So given that you are a Michigander, and you're a native and an expert on that state, we wondered if you could give us a field report on what you see going on from the ground there since you are so close to it.

    Ronna McDaniel: Yeah, it's hard to not be in Michigan all the time because I'm so invested in that state. And of course we flipped it, for the first time in close to 30 years, for President Trump. So a couple things that are interesting about Michigan that also hold true for Pennsylvania and Wisconsin: President Trump took districts or counties that had voted for President Obama and flipped them.

    And so counties in Michigan like Macomb County, which is a huge county outside of Detroit, had been Democrat for years and years and years, and it totally flipped for President Trump. What I'm seeing on the ground now is the enthusiasm in counties like Macomb and Monroe and Jackson, counties that were not traditionally Republican counties, the enthusiasm is even higher.

    So Trump changed our coalition from just being just Republicans to also bringing in blue-collar Democrats and expanding into low-propensity voters that hadn't voted for a long time that came out and voted for President Trump. So in Michigan, we're seeing that continue. We actually last week, for the first time, took the lead in early voting in Michigan, which is the combination of absentee and early voting.

    So the trends are good there. It is going to be tight. We know everybody is going to be coming into Michigan. And some of the key issues that matter there are the renegotiation of USMCA -- that was something that was critical in our state; a lot of jobs were lost after NAFTA -- and bringing those manufacturing jobs back; cutting the corporate tax rates; and a recognition, obviously, that the Tax Cuts and Jobs Act helped a lot of families.

    So Michigan is in play. I'm going to be there this weekend, and the president is going to be there many, many more times before Election Day. But the trend lines that I'm seeing look good, especially with what we're seeing with the early vote.

    Kate Fulton: So you're focusing a lot on the human element of campaigning, which -- in these days, sometimes we feel as if it's all done through the internet and it's all electronic. But what you just described is a very old-fashioned, in a way, human contact, human advocacy, which is interesting in an age when you think it's all on the internet now and there's no more human contact. So that's interesting: that you're focusing on that.

    Ronna McDaniel: Yeah, it's . . . It's so true because there is a point, and I think we all get this -- you know, you see so many ads, and you get so many robo calls, and you get so many mail pieces and digital. It becomes a little bit of noise, and I hate to say that. Voters who are entrenched are okay, but here's the difference: Those swing voters, those voters who are deciding, "Do I even want to vote? I don't like either candidate," or maybe I'm on the fence -- those are the voters that we target with our data. And then before Election Day, those are the doors we'll be knocking.

    They are the ones that are more engaged with a personal touch. And hopefully we've been knocking those doors many, many times because we know who they are. But they're more engaged with that personal touch, and it just makes common sense because we're more kind to each other, or more civil, in person than we are in social media and a lot of other platforms.

    I find that, actually, Washington is not what we see at home. When I talk to my friends who may disagree, we're a lot kinder to each other than what you would think when you look at Twitter and Facebook and some of these other platforms.

    Kate Fulton: Right. It's easier to hang up on someone than to close a door on someone if they're at your door.

    Ronna McDaniel: Exactly.  I say: "Bring your kids and bring pets because people like dogs."

    Kate Fulton: That's right. Bring your dog, yeah.

    Ronna McDaniel: I used to take my kids, and I'd say it's character-building for them. It creates social skills. But also, people can't turn away when you have a 10 year old with you. It's harder.

    Kate Fulton: Right. No, that's very good. Well, we're also learning a lot about the rules -- how all the different states have different rules around ballots and counting votes. It's really interesting that there are so many different rules, and we wondered how you're preparing for these different outcomes in some of the key states at this point.

    Ronna McDaniel: Well, absolutely. Clearly, we all know COVID has changed our lives in a lot of ways, but we have seen in many states . . . And I'm going to say Democrats. I know that not everybody on this call is a Republican, but this is my viewpoint. We've seen a lot of Democrat governors change their election laws because of COVID.

    And then you've seen a concerted push to go in and sue states to change election laws -- so getting rid of things like signature verification, expanding ballot harvesting, and then expanding the deadline to receive ballots well past Election Day. This has been something we've been navigating. We're in over 40 states with lawsuits. Those are dwindling now as we're getting decisions coming down from either the state or the federal courts. You've seen some go to the Supreme Court.

    And then on Election Day, we expect we'll have more challenges. So right now it's litigation, fighting to keep election laws that have been vetted, that have been tried and tested, not changing the system. We're really concerned about just these massive changes and these overhauls in systems that haven't been tried, and so creating chaos.

    We've seen that in the primaries in New York, when it took six weeks to get election results. In Patterson, New Jersey, they've had to redo an entire election because they're changing election laws on the fly without really testing those processes. So that's the first part.

    The second part will be on Election Day. Actually, it's even starting earlier because of so much early vote. We'll have lawyers on the ground helping to make sure we can challenge anything that we see that's not working right. And then obviously if there's any challenges that come on Election Day, we'll be prepared. We've built a huge legal team and an Election Day Operation team to be ready for that.

    Kate Fulton: Well, I'd like to turn now to policy. Before we started formally, we were talking about our audience, which is primarily a very sophisticated investor audience who's focused on the future. We wondered what your thoughts are on the economic recovery and what the priorities should be of the president and of the party in terms of turning to the recovery.

    Ronna McDaniel: Well, first, I want to say thank you, all. And I'm very happy to be speaking to this group because you're taking care of things like my 401(k) -- so thank you very much -- and my kids' college funds and all these things that we want to do well and are so integral to everybody's family planning for their future and their retirement.

    So a couple things that I would say with this recovery that we're seeing as we're coming out of this pandemic. Imagine how difficult of a decision it was for the president to make to shut down this robust economy with 3.5 percent unemployment, with jobs coming back. You just saw a couple weeks ago the median income had risen, in 2019, 6.8 percent. We were pulling people out of poverty. Things were really humming along.

    And then to say: "We're going to shut down our economy so we can take this time to ramp up our PPE, ramp up ventilator production, make sure that we're not inundating our hospitals, that we have the ICU beds," and really asking people to shut their businesses down for the health and safety of our nation. 

    And coming out of that, the key thing, I think, from a business perspective that this administration did that has been so instrumental to our recovery was the PPP loans. They put out more loans in 14 days than had been put out in the previous 14 years. It has been just phenomenal, what they did. I think the banks and the Treasury Department and this lifeline to businesses to be able to have that funding in forgivable loans -- I think it was something to the tune of $500 billion -- it has just really been part of the reason why we're able to come out of this so quickly. 

    Even with that, you've seen job creation of close to 11.4 million jobs. And you're seeing our unemployment rate below 8 percent, which I don't think many people thought we would be in this place heading into November even six months ago. So those are things, I think, that have been critical that this president has done months ago that have allowed us to start recovering coming out of this pandemic.

    And I think the best stimulus is opening up the economy in a safe and healthy way, allowing people to go back to work.

    Kate Fulton: So again, you've given me a preview of the answer to my next question, which is how you would envision the president's first hundred days of his second term. You certainly put a marker down on some of the things that he would focus on in terms of the recovery. Do you have anything else that you'd like to add to that agenda for the first hundred days?

    Ronna McDaniel: Well, I think getting this vaccine out. And again, I credit the president and the administration for, as these trials are taking place, ramping up vaccine production so it will be readily available. The tests that have come out. They just bought 150 million of that new test. Have you seen it? It's a little cardboard test that you can take out, do, and it quickly lets you know if you have COVID. They're distributing those to nursing homes.

    So continuing the expansion of therapeutics, testing and vaccines -- I think that's going to be a huge goal for this administration that they've already been working on, that they will see follow through. And then again, continuing to double down on cutting taxes, deregulation, stimulus package, better trade deals, holding China accountable. These are all things the president has put forward for his vision in the first hundred days.

    Kate Fulton: Well, thank you so much for being with us today. We really appreciate it, and we wish you all the best. And I'll certainly think about you during the knock-around/knock-on. When people are coming to my door, I'll be really nice to them no matter what their message is.

    Guy Cecil & Kate Fulton

    Kate Fulton: Next, it is my pleasure to welcome our next guest, Guy Cecil, Chairman of the largest Democratic super PAC in the U.S., Priorities USA, Guy, Vice President Biden has been consistently ahead in the national polls for the last several months and is also showing significant strength in the key swing states. And as you know, since you've been through this before, we were here for years ago when Secretary Clinton was ahead by almost the same margin. And we were wondering if you feel a little more confident today than you were in 2016.

    Guy Cecil: Well, look, there's certainly no question that both in the national polls and in the six closest battleground states, which we consider Wisconsin, Pennsylvania, Michigan, North Carolina, Arizona, and Florida, we've actually had a remarkably stable race, particularly since Labor Day. You know, unlike a lot of the public polls where you might see huge swings, either in an individual state or in the national numbers, we have typically shown a national horserace somewhere around eight to nine points.

    And the reason that that number is important is because we still are dealing with an electoral college bias. So according to our data, in the national numbers, Joe Biden needs to be up at least by four points in the national head-to-head matchup in order to win the electoral college simply because we're dealing with states that are slightly more conservative than the national average. So we certainly feel good about where things are. There are encouraging signs from the early vote and vote-by-mail numbers.

    But we expect this to be a close race. One, we expect higher turnout, both on our side and on the republican side. And two, we're still dealing with voting in the middle of a pandemic. And so there are going to be challenges related to poll locations and poll workers and making sure we're doing things to protect those that are voting by mail. So while I certainly feel like Joe Biden is in a good spot, we still have a couple more weeks of voting to go and some challenges that will just be different than they were in 2016.

    Kate Fulton: So as the head of the largest Democratic super PAC and as you head into these final couple of weeks, what kind of decisions are you making about resource allocation, both for the Biden-Harris ticket and for some of the key Senate and House races?

    Guy Cecil: Well, as I mentioned, one of the biggest differences between this cycle and previous cycles is just the sheer number of people that will be voting by mail or voting early in person. We certainly [have space] like Colorado, Utah, Oregon, Washington state that have a lot of experience with large numbers of voters voting by mail. But what we're seeing, at least in the early phases so far this cycle, are pretty unprecedented numbers.

    And so that means there's not just an election day. There's not just an early vote period. Really what we've had now in some states are essentially six to seven weeks of voting. And so that changes the way you spend money. We are allocating more resources to what we call ballot chase. That's where we know someone has requested a vote-by-mail ballot, but they haven't returned it yet. So we want to make sure we're following up to remind them to get their ballot in the mail as quickly as possible so that we know it will arrive at your local Clerk's office in time.

    We want to encourage as many people as possible to vote by mail in person. Florida early vote, rather, starts today. So we want people to do that for two reasons: One, it lessens the pressure on election day. That way, we can make sure that people can vote safely. They can socially distance. They can get through the line as quickly as possible. And it also allows us to then allocate more resources to those people that have not voted.

    Kate Fulton: Thank you. So can we shift to the Senate now? Another really exciting set of races in the Senate. And can you comment on where you see the greatest opportunity for pickups for the democrats and how that's going?

    Guy Cecil: Yeah. Even though a lot of our focus -- yeah, even though a lot of our focus is obviously on the Presidential, we're involved in Senate races in Arizona, Maine, and North Carolina. And in my previous life, I served as the Executive Director of the Democrat Senate Campaign Committee and also as the Chief of Staff to Michael Bennett from Colorado. So I have a lot of interest in the Senate because that's where I spent most of my career.

    The democrats are probably at their strongest position they've been the entire cycle. That doesn't mean it's a sure thing. But it means that there are enough competitive seats in play that democrats actually probably have the advantage in terms of gaining the majority. The first two seats that democrats are looking very strong are Colorado and Arizona. In fact, just this week Senate Majority PAC decided to pull their funding from Colorado, which is not a good sign for Corey Gardner.

    Outsider republican groups are spending very little money there, in part in acknowledgement that the race is getting away from them. We've seen Mark Kelly in Arizona with a pretty consistent lead over Senator McSalley, who was appointed to that seat after she lost in the last election against Kristen Sinema. Obviously, the Maine Senate race is competitive. Sarah Gideon leads that race today. It's getting a lot of national attention. A lot of resources poured into that race.

    North Carolina continues to be a competitive race. Cal Cunningham has probably a midsized, mid-single-digit lead in that state. North Carolina's one of those states that has been pretty consistently competitive. Some people have forgotten that Kay Hagan, for example, actually ran ahead of Barrack Obama when he won the state in 2008. And then we have some really great races that I would consider sort of coin flips, or maybe a little better than coin flips - the Senate races in Montana, two Senate races in Georgia, a surprisingly competitive race in South Carolina, a close race in Texas.

    So all of these races again are just an example of the need to put as many of those races in place because what typically happens with Senate races is that all of the close -- too close to call coin-flip races typically all move in the same direction over the last couple of weeks of the election, which I think puts democrats certainly in a better position than they were at the beginning of the cycle to take back the majority. But we should expect that it will be -- it will be close.

    Kate Fulton: So that leads well into my final question, Guy, which is, as investors, we're obviously focused on what the first hundred days would look like for Vice President Biden or for a second Trump administration. And you alluded to obviously focusing on dealing with COVID a lot more aggressively and directly. Can you give us a sense of what we might expect in the first hundred days in terms of the administration working with Congress and what kind of legislation they may work on together right out of the box?

    Guy Cecil: Well, certainly, continuing to think about how we respond to COVID, putting more money directly into the pockets of the American people so that they can make ends meet, put food on the table; making sure that we're prepared for an effective and equitable distribution of the vaccine once it is safe and available so that we have a plan going into it and we're not starting from scratch; making investments in state and local governments, who are --.

    People forget, our state and local governments are forced to balance the books in a way that the Federal government is not. And so if we don't provide resources to them, we're going to continue to see huge cuts and a decline in investments. So first, I think he's going to deal with that. Secondly, we've been talking about infrastructure now for four years. I think every third week, this administration declares it infrastructure week. I would expect that you'll see some type of economic infrastructure package that really focuses on how we get Americans back to work quickly with good-paying jobs.

    And then third, democracy reform. We see what's happening right now in terms of voter suppression activities around the country. So I expect that you'll see democracy reforms of some type, if not in the first hundred days, certainly at the beginning of the Vice President's --. So he's got a lot of work to do. We obviously have problems here at home that we need to address. We have weakened alliances around the world as a result of this administration.

    Kate Fulton: So the Vice President's been very open about his interest in tax issues. And we're obviously following that pretty closely in terms of the interest he has in raising the corporate rate. And he was very clear the other night at the debate that he wouldn't raise -- I guess the Vice-Presidential debate -- wouldn't raise individual rates for people who make under 400,000, but very open his interest in raising the corporate rate. And we anticipate that that will be part of the first hundred days as well. Is that a fair assumption that that will be front and center?

    Guy Cecil: Yeah. I think so. What the campaign and the Vice President and Senator Harris have been very clear about is that they will repeal the portions of the Trump tax bill for those making above 400,000 dollars. There will be no tax increases for those who make less than 400,000. So I certainly think that you'll see some sort of tax bill as part of an economic package. Again, if not in the first hundred days, because there might be a pretty busy, crowded agenda for the first hundred days, I certainly think you'll see some of those economic reforms in the first six months of the administration.

    One of the biggest challenges that we -- that republicans say we have is an increasing Federal debt and deficit. And I would just point out that we were getting record debts and deficits before COVID-19. So without adding all of the additional necessary spending to make sure that the country doesn't fall into an even deeper recession or depression, even before all of those things were happening, what we found was significantly increasing debt and deficits as a result of irresponsible economic policy.

    And unfortunately, it's going to be up to the Vice President to, one, make sure we're making the immediate necessary investments to rebuild the economy, to make sure people aren't -- you know, we have record numbers of people now moving back into poverty, dealing with issues around food insecurity exacerbated by the fact that we don't provide paid child care, that we don't have a real plan to get our kids back to school, which puts further strain on working parents, making it more difficult for them to get back to work.

    So clearly, we need to address those investments early on. But long-term, we need a more sound fiscal policy and economic policy to get the country moving again.

    Kate Fulton: Guy, thanks so much for joining us, particularly in an incredibly hectic time for you. And we really appreciate your insights. You certainly confirmed that this election is like no other. Everyone says that every election, but this one truly is like no other in the middle of a global pandemic.

    Larry Hogan & Kate Fulton

    Kate Fulton: My final guest today is Governor Larry Hogan of Maryland, my home state. And I want to take the liberty of just thanking him on behalf of all the citizens of Maryland for all the amazing work that you've been doing in these last several months. So thank you for being with us, and thank you for everything you're doing.

    I imagine you get this question a lot, but I want to start by asking: As a Republican governor of a very blue state who enjoys an approval rating of over 70 percent, would you share your approach to successfully governing under the current very challenging circumstances?

    Larry Hogan: Well, first of all, thank you very much, Kate. I appreciate the opportunity to be here with you today, and thank you for that introduction. Look, I have always believed very strongly in being bipartisan. I spent most of my life in the private sector as a small businessman, and being elected governor is the first office that I've ever held.

    But I came into it with the idea that I wanted to work across the aisle, to take the best ideas no matter which side of the aisle they came from, and to really work on serious bipartisan solutions to the serious problems that face us. That's the way we've been working for the six years I've been governor, and I think it's been really effective.

    I'm only the second Republican in 242 years in our state to be reelected. And I think it's because people, regardless of their party affiliation, whether they're Republicans or Democrats, they're somewhat frustrated with the divisive politics that we see today on both the right and the left in both parties, and the kind of rhetoric and the way people seem to be more interested in winning arguments than in solving problems and reaching consensus and having compromise. They're just trying to score points.

    And so I guess if there's a secret sauce to why we've been successful here, it's because I've been willing to have a more civil dialogue and to be willing to listen to the other side and try to come up with real solutions.

    Kate Fulton: Well, that leads me to my next question. And that clearly was something that we all appreciated as Marylanders and watching you do what you were doing. But given that the crisis continues to weigh on all of us -- and on you, I'm sure -- what advice would you give to the president, whomever wins next month, to address the pandemic, given that it is still with us and investors are obviously -- and then consumers and citizens are all really concerned about it as we look at the winter surge coming? And do you believe the governors -- and you alluded to this, but can the governors effectively work with the president in the next wave?

    Larry Hogan: Well, it's an excellent question. Look, I think I've tried my best throughout this crisis to communicate very clearly, to state the facts very directly, to educate the public about what was really going on in the various threats that we faced. And I really listened very carefully to all of the experts and the public-health doctors and scientists, along with the leaders of our business community, to try to find that balance between keeping people safe, which is our most important responsibility, but also how we keep our economy moving and keep people working.

    And so I would think whoever is elected in November, the most important thing we can do is be straight with the public, and to really focus on some of the things . . . We've made huge progress with respect to testing and contact tracing, and now we're working hard on vaccine, which is going to be the next thing to really get our economy open.

    But look, I think the governors -- we had, I think, 50-some Zoom calls with all 50 governors across the country that I led. Thirty-some of them were with the president and vice president of the Coronavirus Task Force. We pushed back when we thought things weren't getting done and when we needed more help. We made some progress. And regardless who's elected, I think it's going to be important for everyone -- we're all in this together -- to have the federal, state and local government working as a team with the private sector to try to finally get this virus under control so we can get back to some sense of normalcy. And I think that's the kind of leadership, hopefully, that we're going to have after this election is over with.

    Kate Fulton: Well, you alluded to the vaccine, Governor. I think a lot of people are wondering -- and hoping, obviously -- that the vaccine or vaccines are approved relatively soon. Do you envision that being a state-by-state initiative, or are you hoping or assuming that the federal government will take control of how the vaccine is administered?

    Larry Hogan: Well, I was probably the leading proponent of the federal government stepping up and taking more of a role in the providing of PPE and testing and things like that. For a long time, the states were kind of on their own, competing with one another, competing with the federal government for desperately needed supplies in a very constrained market. But I think we've made improvements there.

    On the vaccine, I think there's going to be a lot more cooperation between the federal and state government. There already has been. I would say it's very promising, what we're seeing. I don't want to put an exact timeframe on it, but we have hundreds of companies -- we have 40 companies right here in my state of Maryland -- that are working on vaccines and/or therapeutics. Some of them are in Phase 3 and getting close to, hopefully, moving forward.

    And I think it's going to be the federal government, the private sector; and the states are going to be the primary means of distribution and deciding -- because we're not going to have enough in production quickly, we have to decide who the priorities are. So we're going to focus on our nursing homes and our front-line healthcare workers and the people that are the most vulnerable until we can get everybody vaccinated. But it's going to be a state/federal cooperation.

    Kate Fulton: So obviously this summer has been a tough summer on many fronts, and we've obviously seen a lot of divisiveness across the country. We started talking about how you try to approach things in a bipartisan way. What else would you recommend to the president and to other leaders to bridge the divide that we're facing on so many levels in the country right now?

    Larry Hogan: Well, I think this is a critically important issue for all of us. I believe that this is the most divided we've ever been as a country, and our politics has gotten to the point where I think most people in America are disgusted with it.

    There was a survey done by a group called More in Common the New York Times did a piece on that said 78 percent of all Americans are frustrated with the political process and angry at the far left and the far right. Most people are somewhat moderate in their politics, and their basic premise is they just want to elect people of either party who are going to represent them and focus on figuring out how to solve the problems.

    I got into politics because I was completely frustrated and fed up with politics as usual. I put together a bipartisan organization made up of just as many Democrats and Independents as there were Republicans, and was elected in this bluest state because I really thought that that's what most people wanted to see. And we turned our economy around. I had the biggest economic turnaround in America.

    But it's not hard to be frustrated by politics today, and sometimes I think we substitute . . . Instead of debate, it's recrimination. Instead of negotiation, there's gridlock. There's a lack of compromise. And the only result, really, is divisiveness and dysfunction. We don't get anything done. And there's plenty of blame to go around -- people on both sides of the aisle.

    But it's critically important, [that] after this election is over with, that we find a way . . . I think that's one of the most important things we can do in America today: Find a way to move on from the current divisiveness that we have and return to a more civil debate, where we can passionately argue various positions and stand up for what you believe in but not be demonizing the other side, and being willing to work together toward some type of middle ground, where we can actually reach agreement and get things done in a bipartisan, commonsense way.

    Kate Fulton: Well, that sounds really encouraging. And for those of us who do work in this space, I agree with you: that there's a lot of divisiveness and a lot of difficulty in trying to solve problems. But there are also a lot of good people -- and you know this, too -- that are trying to do their best. And you certainly represent the best of that.

    One of the issues that's coming out of the crisis -- and there are many, and there are many that you're still grappling with -- and one that BlackRock and many investors are concerned about is the retirement crisis in this country.

    Before COVID, it was already a serious problem in terms of encouraging people to save for retirement. But as we've seen, during the crisis a lot of people have had to tap into their retirement savings. And I wonder whether that's among the many things that you're concerned about in terms of pensions and other issues in the state for state employees as we go into this next phase.

    Larry Hogan: Well, certainly that is one of the important issues because of the . . . You're the experts, but I think it's certainly one of the most difficult financial times we've ever been through in my lifetime -- since the Great Recession, at least. And it's impacted people everywhere. It's impacted, we said, local governments, large corporations, Main Street, mom-and-pop businesses -- you know, hardworking folks that are having difficulty supporting their family. And it's really impacted retired folks, and people out of necessity . . .

    We've had to put all these federal and state stimulus programs just in my small state of Maryland. We've put out $10 billion in assistance programs, and we've put $7.5 billion in unemployment that we've had to administer on behalf of the federal government. And so it's not surprising that individuals have had to tap into their retirement savings.

    And I think the thing that we've got to focus on, besides getting that next stimulus package done, is we've all got to work together on economic recovery so that people are not in the same position that they are currently, and how we find a way to get some normalcy back in the markets.

    And I think in order to do that, we have to continue to focus on, as we have, rapid testing and on the vaccine discoveries and eventual production so that we can start to get all of our economy performing again. And hopefully, folks won't be in such dire straits that they're spending all of their savings and that they're, hopefully, at the point where they're able to start investing again in their future and in their retirement.

    Kate Fulton: Well, Governor, thank you so much for your time today, and thank you to your staff for helping us put this together. It's been a pleasure to meet you and talk to you, and you certainly give us a lot of hope for the future. So thank you very much.

    Larry Hogan: Well, thank you very much. I really appreciate the opportunity. We're all in this together, so let's keep working at trying to turn our country around.

Highlights include:

Insights into what the agenda of the next president could look like


Where the parties are focused in the final days before the election


How each side is attempting to mobilize voters

Investment implications of the 2020 election

Zach Buchwald, BlackRock’s Head of Institutional Business for the U.S. and Canada, leads short conversations with four of our leading investors across equities, fixed income, and emerging markets. Rick Rieder, Kate Moore, Raffaele Savi and Gordon Fraser share their thoughts on portfolio positioning and offer investment ideas that are tied to election results and the 2021 governing agenda.

  • Zach Buchwald: Thank you, Kate. And thank you, Governor Hogan, Chairwoman McDaniel, and Guy Cecil for sharing your insights here at the BlackRock Future Forum. Governor Hogan's comments reminded me a bit of the conversation we hosted at the last Future Forum between Governor Bush of Florida and Governor Rendell of Pennsylvania.

    Their shared message was that there's no monopoly on good ideas by any one person or any one party and that the real solutions come when we work together. The most passionate comments from our audience came during that session because the notion of working together in partnership resonated with so many of us. Thank you, Governor Hogan, for continuing to reinforce that message.

    Okay. We're going to move now to our next segment. We've asked four of BlackRock's leading investors to share their thoughts on portfolio positioning as well as some actionable investment ideas that are tied to the election and the 2021 governing agenda. I am delighted to open this segment with perhaps the most influential fixed-income investor in the world, BlackRock's own Rick Rieder.

    Rick, welcome back to the Future Forum. Thanks, Zach. Thanks for having me.

    Zach Buchwald: Oh, you bet. Rick, you talk often about managing for the near term while investing for the long term. What's your outlook for the remainder of 2020, and how does that inform your long-term approach to investing?

    Rick Rieder: Boy, if you talk about a time that that concept of managing for the near term but investing for the long term [unintelligible] is right now. I mean, this is -- what we've gone through this year around the global pandemic and into an election and into things like Brexit, it's been pretty extraordinary. But I think what you've got to do, and I think what's been the [ballast] for us in thinking about investing has been, what are the big structural dynamics at play?

    The big structural dynamics at play are all around demographics, the aging demographic taking place and technology changing the world of commerce faster than anybody gives credit to. And so that has sort of been the North Star for us in thinking about [unintelligible]. We've got to just keep that in mind. And in fact, in some ways, that [the shoes] of the short term has accelerated those [unintelligible].

    The aging demographic, growth being slower, inflation being more difficult to create, and the demand for income is just -- has just been taken into hyper speed because of the pandemic. And so managing around that and thinking through that has been -- and not just the pandemic, but what the Fed has done to respond to that, [take] rates [to zero] and keeping them there for years. Second being how technology's changing commerce, keeping inflation moderate, but then thinking about whether it's in the credit markets, whether it's in broad economic conditions, technology's shifting the way we thing about it, from cloud to AI to virtual -- kind of virtual economics, et cetera.

    And so I think a lot of like the backbone of how we're investing today is, what do you think about -- how do the structural influences -- how do they play out while we're trying to manage some really -- and by the way, not just the near term being the next couple of weeks, the near term being two to three years of things like the pandemic and how it's going to change a lot of the way we think about the world.

    Zach Buchwald: This is our election special, so I'm going to ask you to focus on sort of the near-near term and think about a potential Biden administration. How do changes in sort of tax and fiscal policy, assuming Biden gets elected, affect your outlook on the markets?

    Rick Rieder: So they do, and it certainly does. But there's also -- I think when you go back to the structure [unintelligible] and shown how the biggest underlying driver that, no matter who is going to be elected, it's going to be the amount of stimulus that gets into the system. And for investing, to us, I mean, we've never seen anything like this when you've got monetary policy -- monetary and fiscal policy that are coming together to create this extraordinary influence.

    And if you think about it, if you have a change in President, you have a change with what the fabric of the Senate looks like, boy, you're going to take that fiscal to another level. And that, I think, the markets have started to recognize it's going to have a huge influence over what growth is going to be. And quite frankly, I'm pretty enthusiastic.

    Like you're going to have better than expectations growth in the next year because that fiscal -- when you talk about -- we put 10 percent of GDP in the economy already, and we're going to get potentially another shot of that, 10 percent of GDP, I think that is going to be, obviously, tremendously significant.

    I think the big one that we're wrestling with now is there's going to be a second part of that, i.e., how do you pay for this, and what do taxes look like, what does the borrowing look like? And that is something that, quite frankly, [unintelligible] clarity on now. And that's going to be really important to markets to get a sense of over the coming weeks.

    Zach Buchwald: I want to ask you about rates as well, sort of thinking about Fed policy and the state of the economy today. Are rates going to go anywhere in 2021? What's your view?

    Rick Rieder: I think they are. And listen, I think the two-year note is not [interesting]. I think grooming our kids to be two-year note traders, I think that's going to be hard for a period of time. When you get out the curve -- when you get out curve, I actually think one of the things that'll happen -- you know, I go to this [unintelligible] of economics, MV = PQ, if you grow the monetary base and then you put fiscal stimulus in, then you get velocity going. So you get the monetary base getting into M2, it definitionally means growth is higher.

    So now think about how this is going to play out in '21. If grow -- if we're right and growth is higher -- and again, we're always subject to [unintelligible] shock -- people will start thinking about, gosh, all of a sudden, financial conditions are very easy. Financial assets are probably responding in course to that. And people will start building, and then gosh, maybe the Fed can actually lift [unintelligible], particularly if employment is improving.

    And I think employment's going to take a longer period of time. So I think you're going to see people start to -- the curve will steepen. And I think it'll be a question of how much that steepening takes place and whether people say, gosh, maybe liftoff doesn't have to stay there until 2023 or longer, that maybe actually [you can] start to lift off a bit earlier, particularly if financial conditions force them there. So that's what we're going to be watching for in '21.

    Zach Buchwald: Last question: In a world of low yields or maybe a steepening curve, scarce income, where are the best opportunities for investors to generate yield today?

    Rick Rieder: So we like credit. We certainly like securitized assets, particularly bespoke finance [and] where in commercial real estate, and really like it in residential real estate. We think residential is in maybe better shape than we've seen in many, many years. So we like -- we certainly like going there. And then parts of the emerging markets, like when you need the yield, you to emerging markets, and it's not always the best time to do it.

    But there are parts of emerging markets that we still think are opportunity. So I think in 2021, I mean, the thing that we're thinking about is get your yield, do bespoke financing, use the credit markets, use parts of the -- and then quite frankly, use inflation. Well, I'm not that worried that inflation's going to move tremendously higher.

    You know, when you think about in a portfolio, gosh, if I can own some tips and they carry pretty well, and they're not [unintelligible] pricing in the Fed, getting out one and a half percent inflation rate, those fit a portfolio quite nicely as well. And then [as] people probably put more equities in portfolio, probably more alternatives in portfolio. But make sure your fixed income's getting a sum yield. And I've said you can get three to four percent in fixed income, get that, and then allows you to do other investing and things like that [for these] alternative, et cetera.

    Zach Buchwald: Rick, thanks for joining us today. It's a privilege speaking with you.

    Rick Rieder: Thanks, Zach.

    Zach Buchwald: I am delighted to be joined next by Kate Moore. Kate is the Head of Thematic Strategy for a multi-asset team at BlackRock. She's responsible for identifying opportunities driven by structural change, policy evolution, dislocations across global markets. Welcome back to the Future Forum, Kate.

    Kate Moore: Yeah, thanks, Zach. It's great to be here.

    Zach Buchwald: Good to see you. Kate, we're in the middle of a very volatile geopolitical climate, especially until the election results become clear. How do you think about the risks and the opportunities that come along with the volatility?

    Kate Moore: So I think sometimes, Zach, people think that volatility's actually a bad thing, or it's something to be shied away from. But I have to tell you, it is actually an enormous opportunity, particularly if you're more of a medium-term or longer-term investor. We've been taking advantage of spikes in volatility either to sell some volatility and declines in volatility to kind of buy volatility's overlay strategies in the portfolio.

    But in general, I would say when investors tend to panic, that's when I [get] to add more to my high conviction ideas in technology, in healthcare and consumer. And I actually welcome those opportunities, given how strong the equity market has been this year.

    Zach Buchwald: That's great. Now your mandate is very broad. I know it cuts across all asset classes, all geographies. With an opportunity set so vast, where are you most focused right now?

    Kate Moore: Well, I think there are a couple of areas that we're really focused in. Number one, I continue to want to invest in these major trends that have been supercharged by the pandemic. So things around digital transformation, demographic change, healthcare, and climate investment. I mean, those are [coming from] the biggest themes that I care about right now.

    But I also think, from a portfolio perspective, about really how can I diversify my portfolio? And actually, one of my favorite ideas there is to continue to buy Chinese A-shares, number one, because their correlation to the rest of the global equity indices is actually quite low, and number two, because you're getting access to an incredible consumer base in technology innovation that I think really complements what we own in the rest of our portfolio.

    So investing along the themes, but also adding to China in this environment, even though there is a geopolitical risk, as we were talking about a moment ago.

    Zach Buchwald: This is our election special. We are in the middle of the election season. China's obviously a very important issue that's on the table. As you think about the election and the governing agenda in 2021 and all the possibilities there, what are the various outcomes that you think we might see, and how are they reflected in your positioning today?

    Kate Moore: So Zach, I think one of the things that people do is, say, if we have a different administration in 2021, there's going to be this meaningful shift in policy. Actually, I'm very much of the view that we're to have a shift in policy in 2021, regardless of whether or not we have a continuation of the Trump administration or whether or not we have a new administration under President Biden. And this is why:

    First of all, two-term Presidents tend to make the biggest policy shifts of their entire tenure in the first year of their second term. That's because they don't worry about elections, and they tend to try to push through big programs. So I would expect, even if Trump has not articulated clearly a policy platform yet, that we would see some big moves next year. And second, I would say, under the democratic proposals, whether it's around investment in clean energy and infrastructure, perhaps some changes to the tax code and some supplements to labor, I would expect those things to get off the ground in pretty short order in 2021.

    But this is pretty exciting because we know some of the democratic platform and we know some of the key issues that Trump cares about. And so we can put together a sector industry in kind of thematic baskets that will benefit under either scenario. So I would say expect big policy change. Expect some sectoral shifts. And we are ready to go under either scenario by the time December hits.

    Zach Buchwald: All right, great insights as always, Kate. Thank you for joining us. Next, I'm happy to welcome Raffaele Savi, BlackRock's Global Head of Systematic Investing. Rafi and his team leverage bigdata and machine learning to inform portfolio positioning. Thanks for joining us today, Rafi.

    Raffaele Savi: Thank you, Zach. It's great to be here and it's great to see you.

    Zach Buchwald: You as well. A lot going on right now that impacts globally equity markets. What are the broad themes that you're most focused on, and how are they reflected in your positioning?

    Raffaele Savi: Well, I think there're two big things going on in equity markets today. Number one is this shift of economic activity from the physical world to the virtual world. The shift has been going on for quite a while, but it's truly accelerated with COVID. Just count the number of Amazon boxes you received sort of in the last month, and you'll figure out that basically, it's like 10 years' worth of shifting from the physical world to the virtual world that happened around COVID.

    Second theme is low interest rates. Interest rates now are at zero or near zero in all developed markets, so that creates a bigger gap between [target] returns for most of our clients and what's achievable with fixed income. It means that equity is having a demand and a role in client portfolio that I think is different from the one that we had historically.

    So these two themes, I think, are driving a lot of the valuation and shape of winners and losers which, as you know, we've seen the biggest divergence in sector performance or [counter]performance that we've had in decades. In terms of positioning, the way we think about it is defense and offense. On the defense side, because these two themes have been so strong and have created this big divergence in performance, I think you want to be careful about a possible snapback.

    So we might not know how it happens or when it happens, but we want to have a little bit more [pain] hedges in our portfolio than usually. The second, the offense piece, is about the opportunity that for a team like ours, a systematic team, this shift from the physical to virtual creates. And I'm thinking about all the work and investment we've done in the data machine learning over the years that is really coming to fruition now, our ability to track things like mobile app downloads, credit card transaction, web traffic, and online job ads, and all the interesting research we can do with it that tell us how [companies]' prospects are changing in a world where a lot of the economic activities now happen virtually rather than physically.

    Zach Buchwald: Let's change gears for just a moment. I want you to tell me more about the data modeling that you run machine learning. How are you using that from past elections? How are you using data modeling to get insights on how markets might react to a new administration next year?

    Raffaele Savi: So we've been -- we've been using data modeling to try to predict political events from a risk management perspective for a long time. And 2016 was a big wakeup call. And by that, I mean that traditional modeling, modeling using data like polls, endorsements, money raised missed the big Trump wave. They also missed the big Brexit wave. You could have gotten those rights adding more alternative data sources like social media traffic, post impression, Facebook spending.

    And so this time around, we really built a model that incorporates all this information. At a high level, I can tell you that, unlike 2016 where sort of the traditional part of the model versus the social media part were really telling two different stories, there seems to be a little bit more accordance this time around. So what you're seeing in polls is sort of, by and large, maybe there's a little bit of a closing of the gap using social media sources, but by and large, directionally, we think the posting can be a little bit more right in this election.

    Zach Buchwald: Fair enough. But we all remember in 2016, obviously, the markets were surprised by the Trump win. But then very quickly, we saw a shift and there was positive change in market sentiment, like four days later. What are the datapoints that you're watching as key indicators that might signal a change in market sentiment this time around?

    Raffaele Savi: You hit on a very important point. The last few episodes where we had a big surprise out of an electoral outcome, I'm thinking Trump victory, I'm thinking Brexit, even [Drexit], market reaction was very, very fast, much faster than the previous cycle. This goes along with the idea that markets are reacting faster [unintelligible] information than before. I think we'll see something like that this time around as well. I think that from the risk perspective, changing position, and you'll see sort of something pretty quick, and then markets will continue to go on their longer-term trends.

    In terms of signposts, going back to what we were talking about before, this big bifurcation in the economy with winners taking more of the share -- the leaders of the virtual world, and everybody else in the physical world struggling, I think you want to ask two questions and look for two signposts: First, are we going to have a stimulus? Then shape and size will be so large and differently distributed that, for example, it's going to make small cap and value more attractive than they've been for the last few years.

    Or we would be in a world in which, by and large, tech and large capital continue to dominate. The second question that is related to this incredible tech dominance is around antitrust policies. Will a different administration have a different attitude towards some of these questions and then might challenge the leadership of tech that is now sort of 10 years old?

    So these two, I think, are more consequential, long-term questions. The election itself, I believe, is going to be more sort of a very short-term effect in the markets.

    Zach Buchwald: Good stuff, Rafi. Thank you very much for joining us today. Now sticking with the equity markets, I'd like to get some perspective from the developing part of the world. And I'm pleased to be joined by Gordon Fraser, who coheads the Emerging Market Equity Team at BlackRock. Welcome to the Future Forum, Gordon.

    Gordon Fraser: It's great to be with you, Zach. Thanks for having me.

    Zach Buchwald: Oh nice to have you. All right, well, let's start by asking, what are the broad themes that are impacting emerging markets most deeply right now?

    Gordon Fraser: I think there're two things I'd highlight. The first is the COVID recovery; how's it going? And the second is global [emerging] policy. So focusing on COVID to start with, I think eight or nine months ago when this outbreak started, many people felt emerging markets would be the worst impacted by COVID. I actually think the reality has turned out somewhat different.

    Broadly, there're two buckets in emerging markets. There're those countries in North Asia that really got on top of this and almost eradicated the virus. And there're the other emerging markets that have actually had [to accept to] let it spread, and they're not past the worst. And both these buckets are seeing quite a good economic recovery, arguably better than what is being seen in the developed world.

    So I think there's a kind of dissonance between the reality and perception on emerging markets, and they're doing a heck of a lot better than many people think. The secondary is global emerging policy. The stimulus that we're seeing in the developed world, both in Europe and in the U.S., is leading to an abundance of cheap liquidity. Eventually, we believe that money will find its way into emerging markets, which offer both higher yield and higher growth.

    To date, we've seen relatively limited flows, but we're watching that very closely to track when that capital starts to come in.

    Zach Buchwald: Now I'd like to talk a little bit about 2021. This is the election special of the Future Forum. What's your base case for a trade and tariff policy under a Biden administration, and how do you think that would affect the outlook for the emerging markets?

    Gordon Fraser: So if we are to get a Biden administration, I think that would be positive for emerging markets. The Trump administration has been bad for the emerging market risk premium just because of the nature of the policies. It's been somewhat unstructured, somewhat random at times. And that really turns people off because they don't know what it's going to happen when they wake up in the morning with their EM investments.

    I think a Biden administration would be probably more structured, probably more globally collaborative just therefore lead to less uncertainty. So I think it's more likely you're going to see capital flows into EM if you do get a Biden administration than if you get a Trump version 2. The other [unintelligible] I guess to think about is what happens in the split between the Senate and the House. If there's a split in the Senate and House, I think that's bad for global [unintelligible] demand and probably bad for most asset classes, although better for EM and DM.

    If there's a joint upset in the House, a sweep, I think that would be the best outcome because you have high equity [unintelligible] globally and you have a Biden administration, which would be positive for EM.

    Zach Buchwald: Now assuming that we actually see a change in administration and we do see some of these policy shifts, within the emerging markets are there certain countries or sectors that you think stand to benefit?

    Gordon Fraser: Absolutely. So on the country side, I think we can definitely highlight China as a first point. That would be no surprise to anyone. China's really drawing a lot of the fire of the Trump administration, and any easing of that would make people more comfortable with their Chinese investments. I'd also call out Mexico. This is a country that on paper should actually have been a big winner of everything that's happened in the last four years.

    They've had a new trade deal. They're benefiting from the split of global supply chains. But that sentiment with Mexico's really been dampened by immigration policies of the Trump administration and the pressure they put on Mexico around that. So if the administration changes there, I think that's good for Mexico. Probably the other area you have to call out is renewables and electric vehicles.

    Around the rest of the world, we've seen a huge surge in demand for renewable energy, a surge in demand for EVs. The U.S. has been a notable laggard in that respect, and I think if you were to get a change in administration, we could expect the U.S. would start to shift in that direction as well. Now that's great news for EM because EM really dominates the supply chain of electric vehicles. EM totally dominates the supply chain of solar. So EM's a big winner of that green wave.

    Zach Buchwald: Gordon, thank you very much for joining us today. That was great.

    Gordon Fraser: You're most welcome. It's been fun.

    Zach Buchwald: Okay, folks. That brings us to the end of our time together today. I'd like to thank all of our special guests - Governor Hogan, Ronna McDaniel, and Guy Cecil, as well as our BlackRock investors for sharing their time and expertise with us. As we like to say at the Future Forum, the future is always unfolding. We at BlackRock will stay in touch with today's experts, and we may send some follow-ups to you with more of their insights.

    From all of us here at BlackRock, thank you for joining us today, and we hope that you and your loved ones stay safe and healthy during these coming weeks. With that, Zach Buchwald, signing off.

Highlights include:

Why Rick Rieder believes the yield curve will steepen in 2021


What big data is telling us about the potential election results


How a new administration could be a boon for emerging markets

Larry Hogan
Governor of Maryland
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Ronna McDaniel
Chair of Republican National Committee
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Guy Cecil
Chairman of Priorities USA
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Kate Fulton
Head of U.S. Public Policy, BlackRock
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Rick Rieder
Chief Investment Officer of Global Fixed Income and Head of Global Allocation Investments, BlackRock
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Kate Moore
Head of Thematic Strategy, Global Allocation Investment Team, BlackRock
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Raffaele Savi
Global Head of BlackRock Systematic and Co-Head of Systematic Active Equity, BlackRock
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Gordon Fraser
Co-Head of Global Emerging Markets Equities, Fundamental Active Equity, BlackRock
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Zach Buchwald
Head of the U.S. and Canada Institutional Business, BlackRock
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BlackRock Future Forum 2020
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BlackRock Future Forum 2020