A post-election discussion

Ryan Caldwell, CIO of Chiron funds, dives into a post-election summary and, along with his guests, analyzes how the election results may affect the landscape of the markets going forward.

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December 17, 2020 | 6 minute read

About this episode

In this episode, Ryan Caldwell, CIO of Chiron funds, is joined by FS Investments Chief U.S. Economist Lara Rhame, FS Investments Managing Director of Government Affairs Eric Edwards, and Chiron Head of Trading Peter Bianco. Ryan sets the tone for this episode with a Beastie Boys throwback and provides a brief summary of post-election events, and the group discusses potential implications that the results will have on the markets.

Transcript excerpt:

Ryan Caldwell (00:00:56):

This is Ryan Caldwell, CIO of Chiron Investment Management, and this is the FS Chiron Podcast number two. And for our listeners who may not know the intro music, that was The Beastie Boys, Rhymin & Stealin, from the License To Ill, I think that was, that wasn’t debut was it, Pete?

Pete Bianco (00:01:22):

It’s definitely old school Beastie Boys.

Ryan Caldwell (00:01:24):

Yeah, no, it’s mid to late ’80s.

Pete Bianco (00:01:26):


Ryan Caldwell (00:01:28):

It’s good, but, again, I felt it was appropriate for where we’re going. So, for this month’s podcast, we thought what we would do is maybe take a little bit of a turn although it’s incredibly pertinent to what we do. What we thought we would do is dive a little bit into a post-election summary and dive into how we think that’s going to affect the landscape going forward and maybe some discussion about implementation after that. I’m joined today by a few of my colleagues, first, Pete Bianco, the head macro trader here at Chiron, got him back for another episode of the podcast.

Ryan Caldwell (00:02:08):

Somehow, although I’m not sure how, we were able to get Lara Rhame, our chief economist here at FS to rejoin the podcast. It was a little touch and go after the last one, I wasn’t sure she would come back, but, somehow, someway, I have got her to join the podcast. And, sneakily, I think she helped me grab Eric Edwards, who is the head of government affairs for FS, and a little bit of background on my relationship with Eric, Eric and I did a client event, Eric, I don’t know, about a month ago, month and a half ago, definitely pre-election.

Ryan Caldwell (00:02:48):

And Eric was incredibly helpful during that discussion with me and, actually, kind of threw some cold water at the time if you remember about a month ago, the big narrative in the market was this big blue wave that was coming and all the things that were going to happen, and Eric actually had some really good thoughts around that and actually kind of tempered some of those expectations, and, quite honestly, helped us think through some things that turned out to be true.

Ryan Caldwell (00:03:18):

So, what we thought we would do today is have Eric kick off and give us a little bit of a post election update, and walk us through some of the big buckets and what’s happening in DC, what’s likely to happen in DC, and maybe even a few predictions. From there, bring Lara, Pete and I back in and maybe kick around some of the implications of what Eric sees and how we think about that in terms of markets and future outlook.

Ryan Caldwell (00:03:48):

So, maybe first, Eric, do you want to give everybody a little bit of your background and sort of how you got to where you are and sort of what the job is today?

Eric Edwards (00:04:02):

Yeah, sure. Before that, I guess I have to rearrange my notes, because you indicated it’s post election. I thought the election was still ongoing.

Ryan Caldwell (00:04:10):

Fair point, very fair point.

Eric Edwards (00:04:13):

I served, worked on Capitol Hill in senior positions on the House Financial Services Committee, over a decade. It was book ended largely by Gramm–Leach–Bliley legislation that I worked on, and then ended with Dodd-Frank. As you do when you’re part of the establishment, I left the Hill right before Dodd-Frank became law and went to work from Goldman Sachs and so I had a period of eating my own cooking. Moved on from Goldman Sachs and I was head of government affairs for a DC based law firm and then one of my first clients was, then, Franklin Square, now FS Investments, and I’ve been on board at FS since 2015 doing government affairs issues.

Eric Edwards (00:04:58):

So, go ahead.

Ryan Caldwell (00:05:00):

No, I was just going to say, Gramm–Leach–Bliley, my God, you take me back to my financial analyst days.

Eric Edwards (00:05:07):

Yeah, at cocktail parties, when people are talking about what caused the financial crisis, I have to raise my hand.

Ryan Caldwell (00:05:16):

No, I remember it clear as day. Clear as day.

Eric Edwards (00:05:20):

Yeah, so, to the never ending Presidential election, I think the markets have held up extremely well considering the circumstances, and by circumstances I mean that one candidate is trying to block the Electoral College from voting, because, let’s be honest, that’s what’s going on publicly here. And for those folks, I won’t go deep into this, but for folks who are wondering, what in the hell is the strategy behind the litigation, et cetera? They’re just trying to throw up enough dirt to block Biden from getting to 270 electoral votes. That’s all it is.

Eric Edwards (00:05:55):

Overall discrediting the vote where possible, trying to prevent swing states from certifying, and then certification happens, which has started today, then they’ll try to flip electors, which they’ll be largely unsuccessful in doing. And then, after that, the next step is to block them from actually voting, so, December 14th is the day that they are scheduled to meet to vote. So, we’ll see what the Trump campaign comes up with between now and then, so, we’re still in this precarious situation, no one really thinks it’s going to be successful, and by success, if Biden doesn’t get to 270, the vote then goes to the House and it’s a one state, one vote format and President Trump would theoretically win that.

Eric Edwards (00:06:42):

So, I look at this, I’m a bank regulatory guy by nature, so I look at this as a huge stress test for our democratic system. And it’s in realtime, and hopefully the markets will continue to ignore this as background noise, knowing that if Trump is successful, the Cap markets are the least of our worries. So, the problem is is that leaves us with basically no lame duck Presidency, the executive is rudderless, I think we all see that. Seemingly the only goal is to make as much trouble as possible for the next administration, so, this is going to make it very difficult for the Biden team to dig out.

Eric Edwards (00:07:23):

The states and private sector are really taking the lead on the pandemic. And it leaves a vacuum that McConnell and Pelosi could have stepped into, but McConnell seems to be singularly focused on getting as many Trump nominated judges through before those nominations expire in January. He doesn’t really seem interested in another COVID package, it’s really him driving that as much as anything, there’s a few folks on the right, but in the House, the Republicans have improved their numbers through this election. So, they also are not, they would like to see a COVID package in the longterm politically, but it’s not something that’s driving them in the short term.

Eric Edwards (00:08:10):

Simply put, the Republican leadership believes that they gain leverage politically by not doing anything now, and then they could pivot in late January to blame the Biden administration. How that affects the markets, it’s not great, because we have a situation where mid December, we’re going off the fiscal cliff again, meaning the funding runs out for the federal government. Can they come together and find a package? I think there’s an outside chance, I would say 30%, that McConnell just refuses to fund the government. That’s not going to reach crisis level by mid January, so, there’s enough things that they can do with the Treasury, we’re not going to run out of money.

Eric Edwards (00:08:52):

So, it’s not a real fiscal cliff issue, but it’s just another notch in the belt of things that are going wrong as we head into the new year. So, that’s kind of the precarious situation we’re in right now with the election slash transition, lame duck, and just one other issue on the transition, this whole, the GSA and the whole formal transition is less of a concern at this point than it’s being made out to be. If it were a real concern for the Biden folks, they would be in court trying to force her to do something rather than trying to browbeat her in the media.

Eric Edwards (00:09:33):

So, that’s kind of a level set of where we are, at least right up to the Georgia runoff, I don’t know if you had any question.

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Ryan Caldwell

Managing Director, FS Investments

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