Eq: Total Market

(New York)

A top Wall Street research team at BTIG has just said that 2021 is going to be a strong year for markets. They view the current volatility in equities as a good buying opportunity. In either a Trump or Biden win, the economy is probably going to receive additional COVID stimulus, as well as further spending, such as an infrastructure bill. Investors are so focused on the risks associated with the election that they have lost sight of the fact that either outcome will likely be positive for the economy and markets.


FINSUM: We tend to agree with this view, even though it is simplistic. In either outcome, both sides of the aisle will probably be served by being more collaborative than at present, so more economic stimulus is coming.

(Washington)

Polls have Biden well ahead of President Trump at the moment. In fact, some pollsters say that Biden is further ahead leading up to election day than any candidate in the last 20 years. Markets have somewhat followed this and are clearly anticipating a Biden victory. That said, there is almost nobody who doesn’t think the race will be very close. So, how to play it if Trump surprises the markets and wins? Three sectors seem like they would benefit most strongly: traditional energy companies, defense companies, and large-cap banks. Trump’s light-touch regulatory approach would help energy companies and large banks, while defense spending would probably continue to rise under Trump.


FINSUM: Most agree that if Trump surprises, the market is not going to shoot higher like it did in 2016, primarily because there is not a big proposed tax cut.

(New York)

There has been a big change of opinion for investors over the last two weeks or so. For almost all of this year, a Biden victory, and especially a blue sweep were seen as potential negatives for the economy vis-à-vis a Trump reelection. Any gains in the polls for Democrats was seen as a negative for the economic outlook, particularly because of the chance for higher taxes. However, the rising odds for a blue sweep have managed to assuage an even bigger fear for investors—a contested election that could drag on for months. Accordingly, gains in the polls for Democrats have seen rising markets. Goldman Sachs feels strongly enough to say this: “All else equal, a blue wave would likely prompt us to upgrade our [US economic growth] forecasts”.


FINSUM: We think there are two specific reasons perceptions have changed. Firstly, the decreased chances for a contested election (very arguable if that is actually true); and secondly, the odds for bigger stimulus and infrastructure packages, which would be positive for the economy.

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