Stimulus matters more to Wall Street than a vaccine: Market researcher James Bianco

A coronavirus vaccine isn’t necessary for the historic rally, according to market forecaster James Bianco.

He sees unprecedented government stimulus policies as the major force behind the run to new highs.

“The market is destined to continue to grind higher on the back of all this stimulus,” the Bianco Research president told CNBC’s “Trading Nation” on Monday. “Right now, the market has got the wind at its back.”

Yet, Bianco feels differently about the overall economy.

“You really need to separate the economy from the markets,” he said. “It may be plateauing a little bit. Initial claims have really flattened out.”

Vaccine or not, Bianco also contends getting sentiment around the virus to change will be a major hurdle. China has reported a significant drop in cases, yet most people are hesitant to resume their pre-pandemic routines. He sees the same situation developing here.

“The mobility indexes that we watch have really flattened out meaning people are not continuing to go out as much as they did,” added Bianco.

His hunch is many people will ultimately avoid a vaccine due to the uncertainty regarding safety. He believes the rush among biotech firms to get one quickly could do more harm than good.

Even though Bianco believes the stimulus policies are more important to Wall Street than a vaccine, he acknowledges the long-term implications could be costly.

“I’ll be blunt. I’m not the biggest fan in the world about a lot of these policies,” said Bianco. “What ends this is inflation. If we get inflation, this game is over.”

In the meantime, he finds the S&P 500 attractive. Bianco expects there will be another stimulus passed the end of this month.

“There is the moral argument about what we’re doing and whether it’s a good idea in the long run,” he said. “Then, there is the performance aspect of these markets, and I’m trying to emphasize the performance aspects right now.”

On Monday, the S&P 500 closed positive for the year by a fraction of one percent, and the tech-heavy Nasdaq closed at an all-time high. It’s now up 20% for 2020.

“Your job if you’re a professional investor is to play, and you have to continue to do the best you can,” Bianco said. “If you want to stand on the sidelines and miss all of this, and say ‘it’s wrong, it’s wrong, it’s wrong,’ remember the old Bernard Baruch line: ‘The market can stay irrational longer than you can stay solvent.'” 

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