CNBC conducted a poll among 20 stock market strategists in order to understand the potential impact the Presidential elections in November this year may have on stocks.
Turns out, the majority of the surveyed strategists predict that Democratic candidate Joe Biden will win the U.S. presidential race. However, they’re significantly divided on what the election would mean for the stock market.
Exactly half of the 20 market strategists think the S&P 500 will decline in the first month after election day regardless of the winner. Five participants stated that they expect a rally, four believe for a range-bound market to happen, and only one declined to answer.
Eight strategists said they foresee a decline of 5% for the S&P 500 in the first month following the election — with three of that group picking Biden, two placing their stake on Trump, and two forecasting a contested election. Two strategists predict a higher decline of 10% for the S&P 500 after the election — one of them picked Biden, the other Trump.
The reason why some respondents voted for a negative market reaction is Biden’s proposed tax policies. “If Biden wins and the Democrats take the Senate, the first major move in 2021 will be lower as the taxation agenda takes shape,” said one analyst. Another said that the market reaction will depend on how the result of Senate races: “If Democrats win the Senate with Biden winning the (White House), then a market rally will probably be harder to come by than if Biden wins and the Senate stays Republican, as he will less likely be able to pursue his tax agenda unchecked under this scenario.”
Only three of the 20 survey participants expect a straight-forward, unopposed Trump victory.
One respondent proposed that it will be the battleground state of Florida that will decide the future outcome of the elections. “Trump will carry most of the red states, however I believe he will lose Florida (and) that will carry Biden to victory.”
While some market players are skeptical because of Biden’s tax policies, others said they are willing to bid on the proposed investments in clean energy and infrastructure that could offset negative investor sentiment.