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Home / Business / The strategist warned on election night, the stock market is ignoring these two risk scenarios

The strategist warned on election night, the stock market is ignoring these two risk scenarios



Voters at the Hale House at the historic Balsams Resort during midnight vote as part of the first ballots cast in the US Presidential Election in Dixville Notch, New Hampshire on 3 November. 2020.

joseph prezioso / Agence France-Presse / Getty Images

Excitement is welcoming investors ahead of the US election, as stocks rallied around the world and Wall Street ready for another bull session.

Some say that markets may be celebrating Democrats’ wins at the White House and Senate and could be a bigger stimulus aid, though opinions differ when it comes to winning the market. The market continued to recover from last week’s sell-off.

“It doesn’t really matter whether Trump or Biden wins the election. Milan Cutkovic, market analyst at Axi, told clients.

To spoil all this pre-election giddy is ours call of the day, from Unigestion’s head of macro and dynamic allocation, Guilhem Savry, who warns that the balance of risk is tilting toward “significantly reducing risk,” with markets underestimating two negative scenarios.

First thing: “globalization of the second wave of COVID-19 spread from Europe to the US” Governments and markets are wiser this time, which helps to remove some uncertainty and we there is a vaccine in the future, he noted.

But entering that wave, Savry found weak US consumption and problems with external demand for China, which reflected troubles in Europe, a region “that doesn’t seem strong enough. to withstand a second shock ”. That means stimulus from deeply indebted governments will be less affected this time and 0% rates are over.

The second risk is the US election itself. Savry warned financial markets are convincing themselves of the so-called ‘green wave’, with investors pivoting into stocks that will benefit from the Democratic Party’s massive stimulus help. Obviously, differing opinions on that as the election approaches.

But Savry expected a “mixed government” – a chairman of the Senate and Democrats of the Republican party. “Such a political situation, in the short term will have a negative impact on assets growth with current expectations”, for the sake of stimulus, and President Donald Trump may oppose that result, sparing increase uncertainty.

“This scenario seems to be undervalued by the markets at this stage,” Savry said.

Over the past few weeks, he has adopted a more bearish stance on risky assets such as development stocks and high yield spreads. He said only two things would reverse that stance in the short term – the emergence of vaccines and / or the stimulus of global coordination for 10% of gross domestic product, well supported by banks. center.

Market

YM00 stock futures contract,
+ 1.26%

ES00,
+ 1.05%

NQ00,
+ 0.52%
are bullish after closing higher on Monday. European Securities SXXP,
+ 1.69%
are rising and stocks are up in Asia. Australia’s central bank has cut its prime rate to a record low and will buy $ 100 billion ($ 70 billion) in government bonds.

Buzz

The final round of national polls showed former Vice President Joe Biden ahead of Trump and in many battlefield states, with 100 million early votes being cast.

Read: The stock market’s ‘presidential predictor’ predicts Biden to win – but another measure in Trump’s favor

As COVID-19 continued to spread rampant on both sides of the Atlantic, Massachusetts Governor Charlie Baker announced new restrictions, including a nightly curfew, to control COVID- cases. 19. That was the White House coronavirus lead, Dr. Deborah Birx, warning the United States is entering the “deadliest phase” and calls for “much more aggressive action”.

Authorities in Vienna, Austria, are on the hunt after gunmen launched a terrorist attack that left 5 dead and 17 injured on Monday night.

Twitter TWTR,
-4.57%
stocks rose after the microblogging group said they would begin stock repurchases and CEO Jack Dorsey’s job was assured after review by management, Securities and Exchange Commission filings for know by the end of Monday.

PayPal shares fell after a forecast of a less-happy holiday season than expected by an online payment processor.

Factory orders and auto sales are ahead.

Big effort to test and develop COVID-19 treatment, the cutting-edge technology behind the cloud, and how a venture capitalist finds investment opportunities. Listen to LabCorp and Arista CEOS and Defy’s co-founders at 1pm this Thursday. Sign up here for Barron’s Investing in Technology.

Chart

Random reading

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Green, glowing platypus fur.

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