David Nelson, Chief Strategist at Belpointe, joins Yahoo Finance's The First Trade with Alexis Chrisotoforous and Brian Sozzi to discuss what's moving the markets on Tuesday morning.

Video Transcript

ALEXIS CHRISTOFOROUS: Let's get back to the markets now where stocks are slightly lower. We've got David Nelson, Chief Market Strategist at Belpointe joining us. David, good to see you. So is the market in a holding pattern here waiting for the debate tonight, waiting for perhaps a stimulus plan? What are investors waiting for?

DAVID NELSON: Probably all of the above. I think the debate is an important issue. I think everybody will be looking to see if there's a viral moment on either side of the campaign. And the election as a whole is a big holding pattern.

Election night is going to look a lot more like election month, and you're going to see lawyers with parachutes descend on every state with a hanging chad or a questionable ballot. And it could drag on weeks, perhaps a month, and maybe even go to the Supreme Court. And I think it speaks volumes as to why the VIX and other volatility indicators are as high as they are, even with markets that are close to all-time highs.

BRIAN SOZZI: David, we just had former governor Deval Patrick on, and he said it would be-- it's OK to raise taxes on businesses if it would equate to a period of low sustain-- or not low, just sustained economic growth. As someone who has money at play here, money in the markets, does that excite you about putting more money in the markets?

DAVID NELSON: Not a lot at this point. It's a challenge right now. It's almost a bizarro world out there, up is down, down is up. If you look at-- if you look at what's happening, even-- even this quarter, you're going to have-- we're about to report earnings down about 21% year-on-year in a dynamic where GDP is up 30%. That's almost a bizarro-like circumstance at this point.

I look at the broad backdrop, and we seem to be rushing from one side of the lifeboat to the other. We hide in secular growth when we think COVID is coming back or when the economy is going to fail. And then we go back into-- go back into, you know, industrials and other cyclical names when we think that things are OK.

I think one of two things are going to happen. Either-- either we're going to have a vaccine and/or cure to get out of this, or America's going to just understand that we've got to learn to deal with this, and deal with it on an ongoing basis, and find ways to go back to work, because we can't sustain the economy with stimulus after stimulus after stimulus. At some point, you have to draw the line and find ways to deal with the virus and work-- and find ways to go back to work.

BRIAN SOZZI: But David, are higher taxes on businesses, as Joe Biden proposed, is that good?

DAVID NELSON: Well, I'd have to slash my numbers by 15% for next year, so that will certainly be a wrinkle for the market. I think the bigger issue around taxes is really something else. We're going have to come to a mindset. If you're trying to close the inequality gap, you're going to have to get away from the idea that we're going to tax capital and people differently, and that's what's happening right now.

It's a big part of the reason why Trump's taxes-- he paid no taxes. John Kerry actually wrote some of the laws that he took advantage of. And the 1031 exchange where real estate investors can delay forever, for a generation and never pay the capital gains on their property, that's part of the tax law. There's nothing illegal about it.

We need to deal with those things to close-- to close the gap. We need to completely throw the current system out. It's 77,000 pages long, and most of those pages and most of those line items are designed to help you avoid paying taxes in the first place. We have to start from scratch and build a new system.

ALEXIS CHRISTOFOROUS: David, you said we're living in a bizarro world. I don't think a lot of people would challenge you on that right now. But I want to get your thoughts on gold as a hedge, because UBS coming out saying they believe investors should be putting their money in gold right now. They're predicting gold's going to hit $2,000 an ounce again before the end of the year. As we look for hedges during this volatile time, what's your take on gold right now and your exposure there?

DAVID NELSON: My exposure is probably about 11% in our-- in our tactical strategies in gold. It's been there for probably a little more than a year at this point. I think it's a decent hedge, because you're going to have a weak dollar. We're obviously in a stimulus mindset. You have a Fed balance sheet that grows almost every day. It's now-- it's grown $3 trillion just this year.

So in that-- in that world, gold could be a good hedge. Unfortunately, as a-- it's not a perfect hedge. And just when you need it most, it may not be there. So it's not a guarantee that it's going to go up because the markets go down.

It's probably better correlated, or rather inversely correlated with the dollar. That's better dynamic for it to look at. But it's certainly a part of our tactical strategies, and I think it could be in anybody's portfolio.

BRIAN SOZZI: David, Goldman Sachs out this morning saying that the COVID-19 pandemic is more of a risk to the markets for the rest of this year than the election. Would you agree with that?

DAVID NELSON: Well, he cut his numbers on it. He cut his numbers by 50%. Jan Hatzius cut numbers 50% last week on GDP for the fourth quarter. And that was my biggest concern that GDP numbers for Q3 were going up and Q4 numbers were going down.

But he also pointed to the lack of the stimulus plan. He said the failure of Congress to put a package together, any kind of a package together, is the reason that he was cutting his-- his numbers. So in that sense, the relationship there between COVID and the economy is pretty real.

I'm fortunate in that I work in an information-based business. I can work from home and do my job. And if you work in that kind of industry, you can survive. But if you work in close proximity industries like retail, transportation, or god forbid, a restaurant, you're challenge, and you need-- you need your-- your congressman, you need your senators to do something.

There are points they agree on. They should do something at this point. There's a reason why the ratings for the House and the Senate are the lowest in generations, because they're putting policy-- partisan politics in front of the needs of their constituents.

ALEXIS CHRISTOFOROUS: David, what's your outlook on-- on retail and restaurant stocks? You just mentioned tough to be a restaurant owner in this environment. Have you changed your holdings in those sectors at all?

DAVID NELSON: I have some retail. I have some-- I own Walmart. I own Lowe's. And I have Best Buy at this point. I don't have any-- I don't have anything in restaurants. Some will get it right, some-- some won't.

It'll be difficult, at best, because even as you go back to work, it's pretty likely we're going to have social distancing. So if you're processing less customers in a given day, by definition your revenue is cut. So how do you get back to previous levels? And I think that's an issue for any close proximity business, whether you're an airline, or restaurant, or even a theme park.

ALEXIS CHRISTOFOROUS: All right, David Nelson, Chief Strategist at Belpointe.

DAVID NELSON: Thank you.

ALEXIS CHRISTOFOROUS: Always good to see you.

DAVID NELSON: Take care.