The majority of investors think Joe Biden will win the US presidency over incumbent Donald Trump, according to a new survey of money managers in charge of $3tn of US assets.
The survey by UK pollster Survation found that 60 per cent of 91 investment professionals polled in September, most based in the US, believe Mr Biden will prevail in the vote on November 3. That result is broadly expected to be negative for US equities, and potentially also for the dollar, depending on how the two main parties perform in Congressional elections at the same time.
Now that the presidential election is coming into view, investors have grown nervous that the result of the vote may not immediately be clear. President Trump this week refused to commit to a peaceful handover of power if he were to lose, potentially setting the scene for a lengthy period of market volatility.
In a recent note, Joyce Chang, chair of global research at JPMorgan, warned investors to “prepare for Election Week(s) rather than an Election Day outcome”.
But in the event of a clear result, the Survation report suggests that a Trump victory, especially coupled with Republicans retaining the Senate and winning the House, would present a large market shock that could spark an equity rally.
In total, 48.4 per cent of the respondents forecast the Republicans will hold on to the Senate, with 43 per cent expecting a Democratic victory. The remaining 8.6 per cent forecast a tie.
A whopping 88.5 per cent of those surveyed said Democrats will maintain their majority in the lower chamber, having won it back from Republicans during the 2018 contest.
In a so-called clean sweep where the Democrats win the presidency and both chambers of Congress, 60 per cent said it would be bearish for the US stock market outlook overall, with just 15 per cent taking a more positive view. The brunt of the burden is expected to fall on securities in the energy sector — 71 per cent expect a negative response — while more than half expect declines for healthcare and financials. Two-thirds of respondents believe it would be positive for companies oriented around environmental, social and governance issues.
A continuation of the current balance, with Mr Trump as president, a Republican Senate and Democratic House, would be more supportive for markets, the survey found. Almost half said it would be bullish for US stocks, with a little more than a third neutral on the outlook.
According to Brian Nick, chief investment strategist at Nuveen, additional stimulus support will be the most important determinant of where equities go from here.
“Any newly inaugurated president is going to see what the economic situation is and want to address it,” he said. “That becomes broadly positive for the stock market.”
In the event of a split Congress or a White House that does not have the majority in either chamber, the potential gains or losses shrink dramatically.
The survey did not broach the potential impact of a less than clear-cut outcome. Investors are already bracing for it to take time for the election results to be finalised, given the historic number of mail-in ballots expected to be used because of the coronavirus outbreak.
Ms Chang at JPMorgan said investors have already begun to grapple with the prospect of an “extreme” scenario where Mr Trump draws out a lengthy period of dispute over the result, with elevated volatility priced in well after election day.
National polls suggest Mr Biden will win the presidency.