The presidential election is one of many things to worry about, said Johnson.
Investors also have to watch for the outcome of congressional races and how that could dictate fiscal policy for the years to come.
The debate over another COVID-19 economic stimulus package and whether or not there is a second surge of the pandemic in the United States are also likely factors that could slow what Johnson believes is a bull market that has the foundation to last a couple of more years.
CONWAY G. GITTENS: Wall Street seeing a minor pullback on this Tuesday, after several days of gains. Let's find out what's going on with Hugh Johnson. He's the chief investment officer at Hugh Johnson Advisors. Thank you, Hugh, for joining us.
HUGH JOHNSON: Nice to be with you. Great to be with you.
CONWAY G. GITTENS: So it looks like the market is taking its cue from the debate that's going to happen tonight. As a long-term investor, what are you looking to hear from the presidential candidates tonight?
HUGH JOHNSON: You know, Conway, I've got my fingers crossed. And what I'm looking for is some substance, some ideas as to what their policies might be, depending on who wins the election. And of course, right at the top of the list is government tax policy. What is Mr. Trump's tax policy going to be? Is he going to continue to lower interest rates? I suspect that's his policy. I'm not sure we're going to hear about it.
And then, of course, for Mr. Biden, he's got a program which will include significant increases in taxes, but also increases in spending. So it might have a neutral impact on the economy. But it's really tax policy, number one, and then spending policy, number two, to get an idea of what kind of an impact that's going to have on obviously, the debt and the deficits, and therefore, the economy, and therefore the financial market. So cross your fingers and hope we get substance. I'm not sure we're going to get it.
CONWAY G. GITTENS: So we got the election what, five weeks away now. I mean, the last couple of weeks, I mean maybe just the last week or two, we've seen this resurgence of volatility. Some of it has been pinned to high flying tech stocks going too high. Some people pegging it on the election. From your viewpoint, what's likely to happen than this five-week window?
HUGH JOHNSON: You know, you've got a lot of issues that are really facing investors. And I think you just mentioned one of them. It's not just technology stocks, but the markets overall are facing a valuation problem. We've come very far, very fast, up 63% since the March low to a level which I would argue, we got to a level, which I would argue was pretty pricey or overvalued. And that was true not just of the general market, but also technology stocks.
And then of course, we watch what's going on in Europe and we see the upsurge or the surge in the pandemic in Europe and hoping that we don't see a similar surge in US. We've seen some surge or some flattening out in the infection rate, but we don't see a follow-through, we don't see bad numbers on the death side or the hospitalization side. So I think we can manage it. But nevertheless, everybody's worried about that.
And then there's the election, of course, which is what are their policies going to be? What are their tax and spending policies going to be? So you've got a lot of things happening, crosscurrents, and that's creating big up days and big down days and lots of volatility. And between now and the election, we're going to have more news on all of those fronts. And that's going to create ongoing volatility.
But believe me, Conway, the number one focus, shall we say, of investors, is clearly on the two candidates and who's going to win this election. And it's not just the presidential election. Let's remember we have a congressional election too. And it's going to be a real tight call on who's going to win the Senate.
CONWAY G. GITTENS: And sticking a little bit with politics and Wall Street, we got word today that there might have been some progress on the stimulus talks between Nancy Pelosi and the Treasury Department. So how important is that resolution, whether it comes before or after the election? How important is that?
HUGH JOHNSON: Conway, it's really important. And it's really important for all sorts of reasons. We see the US economy is recovering from the March and April lows. We see that, and that's good news. But at the same time, although we're seeing that recovery, there's still a lot of people, 13.5 million people, workers that are still unemployed, and they need help. And this economy's in the process of yes, recovering, but it's slowing. And it's going to continue to slow unless they do get help. So some stimulus.
Maybe it's not the $2.4 trillion that Nancy Pelosi wants. Maybe it's a lot less than that. But some stimulus to help this economy through a very difficult time. Otherwise, I cross my fingers and worry about the forecast for the economy. Not the third quarter, that's done. But the fourth quarter and 2021. And not just the forecast for the economy. The forecast for earnings.
So it hangs in the balance. And it hangs in the balance largely because we've got to get some stimulus to get us through 2021. To get us into 2021 through the fourth quarter, and hopefully a good 2021. I'm crossing my fingers hoping we're going to get it, but I don't think before the election you'll get it. Maybe after the election.
CONWAY G. GITTENS: I know if in your view, if it walks like a bull and talks like a bull and looks like a bull, it is a bull. And that's how you feel about the bull, about this market that we're in right now. How important is that stimulus package to the continuation of what you are describing as a bull market?
HUGH JOHNSON: Well, it's a bull market if you see the market going up, but lots of other things. Sector performance, you see the so-called economically sensitive sectors doing well. You know, the signs from the financial markets is, we're going to continue to have an expansion in the US economy. But believe me, it's going to be tough to get that expansion unless we get some stimulus or some help.
So 2021, not just the growth of the economy, the growth of earnings is key to me being resolute in saying we're in a bull market. I believe we are in a bull market. I believe we got overvalued and we're now sort of in the process of correcting from being overvalued. But I think that's, importantly, I think that's within the context of an ongoing bull market.
We'll get through it. Hopefully, we get to a little bit lower level where things look a little bit cheaper, better to buy, and better valuations. But nevertheless, all of this is occurring within the context of an ongoing bull market. Keep in mind, Conway, this is the six month mark of this bull market, and the average duration of all the postwar bull markets is 63 months. So I think we've got a long way to go. We just got to get through a very, very turbulent period.
CONWAY G. GITTENS: All right, great. That's Hugh Johnson, the chief investment officer Hugh Johnson Advisors I'm Conway G. Gittens, and this is Reuters.