An “orderly Trump win” would propel the benchmark S&P 500 index higher by 13% to approximately 3,900, wrote a team of JPMorgan strategists led by Dubravko Lakos-Bujas.
S&P 500 Could Hit 3,900 on Trump Win
Under that scenario, the strategist thinks deep value sectors like energy and financials could benefit due to a large short squeeze. On the other hand, they say a victory by former Vice President Joe Biden could cause investors to take profits in the high-flying tech stocks in preparation for an increase of the capital gains tax.
|XLE||ENERGY SELECT SECTOR SPDR ETF||68.51||-1.19||-1.71%|
|XLF||FINANCIAL SELECT SECTOR SPDR ETF||31.69||-0.08||-0.25%|
|QQQ||INVESCO QQQ NASDAQ 100||288.80||+1.84||+0.64%|
The firm also sees gridlock as a “net positive” and a Democratic sweep as “mostly neutral.”
Wall Street typically likes gridlock as it prevents major regulatory changes. A blue wave would lead to some positive catalysts through more fiscal stimulus and infrastructure spending while also resulting in negative consequences like higher taxes.
With eight days to go until the election, the polls suggest Trump faces an uphill battle to reelection.
Biden leads by 8.3 points nationally, according to an average of polls compiled by RealClear Politics. His lead is down to 4 points in the key battleground states. Additionally, traders on the betting platform PredictIt are pricing in a 54% chance of a Democratic sweep.
A different JPMorgan team said earlier this month that voter-registration patterns suggest the election is closer than the polls indicate, and Trump agrees. The president has repeatedly said his campaign’s internal polling looks good despite the public polls showing momentum building towards Biden.
“Polls numbers are looking very strong,” Trump tweeted earlier this month. “Big crowds, great enthusiasm. Massive RED WAVE coming!!!”