Unclear US presidential election is a problem for investors betting on a bigger stimulus package, JPMorgan says
- An unclear outcome of the US presidential election would be problematic for investors counting on the approval of a bigger stimulus package,
JPMorgansaid on Wednesday.
- "The Congressional count so far has already become a spoiler" for investors positioning for a fiscal splurge early next year, the JPMorgan strategist John Normand said.
- The outlook has quickly shifted from anticipating a baseline "blue wave" and decisive win for Joe Biden and the massive stimulus that would bring to considering what a contested election and a split Congress would mean.
- Here's the live 2020 US presidential election tracker.
An unclear outcome of the US presidential election is problematic for investors betting on a bigger stimulus package, JPMorgan said on Wednesday.
The inconclusive results as of Wednesday morning reveal how evenly divided the US electorate remains after one of the most unusual presidential campaigns in modern history, the JPMorgan strategist John Normand said.
The Senate hangs in the balance, as Democrats and Republicans were stuck in election gridlock early Wednesday. "The Congressional count so far has already become a spoiler" for investors betting on large-scale government spending in early 2021, Normand said.
Over the past two decades, four of seven elections were won by candidates who gained less than 50% of the popular vote, reflecting the fluidity of such races when the electorate is fairly evenly divided, he said.
Read more: Iconiq Capital, which counts some of the world's most influential families as clients, broke down the investment implications of the US election. Here are the highlights of its 23-page presentation.
If the Democrats were to pick up the second open Senate seat in Georgia in a January run-off election, the Senate would still seem to remain Republican-controlled, meaning the stimulus issue would still be a problem, Normand said.
Resistance to transformational policies is great news for those who believe government inaction translates to favorable asset prices in the medium term but is largely problematic for investors expecting to see a fiscal splurge next year, he said.
According to the bank, there were no strong commitments to rotations based on a change in fiscal policy.
"In equities, several Blue Wave/Biden-as-President rotations had gathered pace in October — from growth to value, defensives to cyclicals and US to Asia — but gains on each of them over the past month had been too small (2% to 5%) to suggest strong commitment to rotation," Normand said in a note.
Read more: Bond king Jeff Gundlach predicts a Trump win, but with 'far less conviction' than in 2016. He and famed economist David Rosenberg share their picks for the best and safest areas to invest in a post-election world.
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