Markets look for calm with healthcare key, says Ariel Investments’ Mellody Hobson

Markets looking at the potential for a ‘sense of calm’ from the White House after the turbulent four years of President Donald Trump.

Chicago fund manager Mellody Hobson is co-chief executive of Ariel Investments, vice chair of Starbucks Corporation and a board member of JPMorgan Chase. Picture Chris Pavlich for The Australian

US stock markets were pleased with the election of a Biden president with a potential US Senate restraining his most radical policies, Chicago fund manager Mellody Hobson told the Australian’s Strategic Forum on Thursday.

Ms Hobson who is co-chief executive of Ariel Investments, vice chair of Starbucks Corporation and a board member of JPMorgan Chase, said the US stock market was continuing to rise on the good news of a potential vaccine against the pandemic, looking ahead to a post COVID US business world.

“The markets like the outcome,” she said.

“The market likes the fact that we have a Congress divided from the executive branch,” she said.

“That meant that there would be restraint in terms of some of the progressive policies that might come out of the Biden administration.”

She said the market also like the potential for a “sense of calm” from the White House after the turbulent four years of President Trump.

“They like the fact that we will be in for a calmer period than we have had, with the tweets and some of the upheaval and the turnover,” she said.

Ms Hobson said there were also expectations for improved US relations with other governments including around trade policies.

She said it was not yet clear what policies the Biden administration would want to purse once it took office in January or what would happen with corporate and personal tax rates if the Republicans won control of the Senate.

“There has been a lot of talk around taxes.

“I think the market has priced that in.”

She said the US share market was forecasting a “post vaccine economy.”

“Once we have a vaccine and the wheels start to get back in motion, what is the likelihood of an improved business conditions from where we are today?”

She said this week’s news of a potential COVID 19 vaccine from US drug company Moderna was “very, very good news from a global perspective” as it seemed to be more “doable” than the vaccine from Pfizer which needed to be kept at very low temperatures.

Ms Hobson said healthcare would be an increasingly important sector of global economies throwing up new investing possibilities.

“Healthcare will continue to be very, very big,” she said.

“It will be big in America because of the changing demographics of our country and the fact that we have ageing baby boomers who want more health care.”

She said there was also a need to deliver more health care to the masses of ordinary people in a much better way than was being done today.

She said the COVID-19 pandemic was a good example the importance of good healthcare being available for the whole world and not just the wealthiest parts of the world.

“None of us is safe until all of us are safe,” she said.

Producer George Lucas, left, and his wife Mellody Hobson in 2013 at The 40th Annual Daytime Emmy Awards in Beverly Hills. Picture: AP Photo/Entertainment Fusion Group, Ryan Miller

She said there would be improved innovation in global healthcare around the world as well as improved access to health care which would see the sector grow.

Founded in 1983 with an initial focus on investing in small and medium size companies, Ariel has some $US12bn in funds under management with offices in Chicago, New York, Washington and Sydney.

The fund takes a value approach to investing, following along the investment philosophy of Omaha based billionaire Warren Buffett.

She said value stocks had underperformed growth stocks in the US in recent times with companies like Google, Apple, Facebook and Amazon, continuing to grow as a result of the pandemic as people spent more time at home and online.

But she said the future would see a return to better performance from more value orientated investing including investments in small to medium sized companies.

Ms Hobson, whose company was the first major minority owned fund management company in America, said the rise of the Black Lives Matter movement in the US had implications for US corporations which had to be more mindful of their policies and on community attitudes.

She said the use of mobile phones to record what was happening to black Americans had produced a third wave of civil rights consciousness in the US after the first wave under the emancipation of the slaves under President Lincoln in the 1860s and the second wave being the civil rights act of the 1960s

She said events such as the recent death of George Floyd at the hands of a white US policeman “had been going on forever.”

“What has changed is that people are now going around with mobile phones and recording it.”

She said past eras had seen a big role for government in passing legislation to change the rights of African Americas, but this area was different.

“This is civil rights 3.0,” she said.

“What is different is that it has landed at the feet of corporate America which now has to deal with it in ways that it never did before.”

“There is now a big conversation going on in America around race, diversity and inclusion.

“Companies are taking stock of the environment and counting how does the corporation look in terms of board level and the C suite level.

She said companies around the world were now going to be “more accountable than ever before” over the social aspects of their operations including complaints by employees and customers and more open to criticism from a vocal public over their activities.

She had this had seen the Washington Redskins football team changed its name under pressure from its biggest sponsor FedEx.

“It is harder to navigate these social issues,

“There is no question about it.”

“But it is also not possible to turn a blind eye to what is going on in our society.”

She said Ariel felt it had an obligation to “create opportunities” for other people of colour in communities including conducting financial literacy programs for school children.