In this news, we discuss the Analysts’ View: U.S. stock futures up as election results show close race.
(Reuters) – US stock market futures surged in Asia on Wednesday as US presidential voting projections deteriorated to show weaker odds for a Joe Biden sweep, a tight race and maybe a long wait for the result.
Investors had hoped to avoid a protracted process that would delay any stimulus to help an economy recover from the coronavirus pandemic.
E-Mini futures for the S&P 500 ESc1 rose 1.65% in a volatile session.
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Signs that President Donald Trump could win Florida have dampened expectations of a quick result and saw 10-year Treasury yields fall to 0.84% US10YT = RR from a five-month high of 0.93%.
The US dollar gained 0.7% on a basket of currencies to 94.20 = USD.
BRIAN BETHUNE, CHIEF ECONOMIST, ALPHA ECONOMIC FORESIGHTS LLC, BOSTON
“It’s still early. It’s a bit tighter than most people expected. As the map fills up, you can easily see fluctuations of 10 to 20 basis points on the map. 10-year note from the US Treasury.
“If Republicans control the Senate, they won’t be as interested in a big stimulus. Markets actually prefer traffic jams. This keeps things from tilting one way or the other, whether it’s spending or taxes. This is the problem: Markets would rather have a predictable environment in terms of taxes and trade, rather than not knowing what tariffs will hit them over the next six months. So a “predictable” path would be the continuation of the current regime, or for the Senate to see a lot of Democratic gains but a Trump White House.
MAX GOKHMAN, HEAD OF ASSET ALLOCATION, PACIFIC LIFE FUND ADVISORS, NEWPORT BEACH, CALIFORNIA
“It is very important not to extrapolate too much from these early figures. While Biden can lose Florida, he can win Texas where the polls just closed. And that would result in more votes in the constituencies and be much more upset. It will be a wild night at best and maybe 48 wild hours.
“The impact on the market will be quite volatile. The irony is that because some investors, including us, have moved to more neutral positions, any movement can be amplified and make conditions much more volatile. The question is whether it will come back to Pennsylvania and Ohio. I’m going to stand for hours and think I’m going to sleep on Thursday. “
MATT SHERWOOD, HEAD OF INVESTMENT STRATEGY, PERPETUAL, SYDNEY
“At the moment, there are no firm conclusions to be drawn other than that it looks like Trump won Florida, and so, that sets the stage for him to win and it all comes down to the Midwest.
“It’s a wait and see. I would not change portfolios yet or make asset allocation decisions based on partial government results. You’re just going to have to sit down and wait for the results to actually show up.
“I think the odds of a clean sweep are diminishing, almost by the minute. This reduces the possibility, or at least the likelihood, that a large stimulus package will be agreed upon in the early days of a Biden administration.
LEI WANG, PORTFOLIO MANAGER, THORNBURG INVESTMENT MANAGEMENT
“The election result – or the lack of it – will not lead to any major change in our holdings in any sector or geographic area.
“In fact, an unknown outcome or contested election scenario would likely add a short-term risk premium, triggering risk-free behavior and high volatility. But once the dust settles … the market will once again focus on the long term implications of winner’s policies, many of which we have been able to envision throughout the campaign. “
TONY ROTH, HEAD OF INVESTMENTS, WILMINGTON TRUST INVESTMENT, PENNSYLVANIA
Unless Biden can hold onto Ohio tonight or potentially North Carolina, which seems like a very bleak prospect at the moment, given the pace at which the president seems to be catching up, it looks like we’re not going to. not knowing the outcome of the election for a while, which will be hard for the market to digest … We thought Biden had a very good chance of winning, but I think those chances are diminishing.
TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST, INVERNESS BOARD, NEW YORK
“Again, it seems the pollsters got it wrong. The states that should be at stake are still at stake. If it’s a Trump administration, it will be the same, perhaps accentuated, because it has nothing to fear. The Cold War with China will be worse. Lack of support for states and local governments will be worse. The stimulus support will be watered down. It will not support the general population much.
“If it’s Trump, you’re not going to see a big package. There is a risk that the virus will spread, and that is not good for the economy. No matter who is elected, we will always have a vaccine. Big tech is likely to come together if Trump is re-elected due to a lack of regulation and efforts to dismantle them.
DAVID R. KOTOK, PRESIDENT AND CIO, CUMBERLAND ADVISORS, FLORIDA
“The market wanted a decisive blue wave and to do that, they needed Florida early. The markets were discounting the great blue wave, so futures turned red.
“In last week’s sale, we increased our allocations (to US stocks). We took advantage of the sale and it seemed to us that the sale had reached sentiment extremes… and so far it has been a good transaction.
“I am convinced that when you remove uncertainty in a political race like this, removing uncertainty means markets go up and I think we had a very high uncertainty premium that was reflected in the extreme last week.
“My biggest concern is the backlash in the country and the prolongation of the decision. We experienced one of these events 20 years ago. Part of the mindset of people is that market agents were prepared for this. What they are not prepared for is civil unrest that turns into decisive violence. This is my biggest fear.
YUICHI MURAO, MANAGING DIRECTOR OF INVESTMENTS, NOMURA ASSET MANAGEMENT, TOKYO
“Markets seem to have taken a Biden victory into account to some extent, which is why we’ve seen environmental stocks outperform and energy and tech stocks relatively weak. The market was worried about corporate tax increases.
“In the event of a Trump victory, there will be political continuity, which means little negative impact on corporate earnings, but weaker fiscal stimulus than a Biden administration would likely offer.
THOMAS HAYES, PRESIDENT, GREAT HILL CAPITAL, NEW YORK
“I think the market came with a strong expectation of a blue wave and now they have to look at a status quo situation. If Trump wins, the corporate rate will stay the same, which is the biggest problem for the stock market where he could lose up to $ 20 in S&P profits if tax rates rise.
“The best case is going to be a dead end, whether it’s a Biden or a Trump presidency. I think the market is reassessing its assumptions. If you don’t have a blue wave, you will have a smaller stimulus. “
SIMON WESTON, SENIOR ASIAN EQUITY PORTFOLIO MANAGER, AXA INVESTMENT MANAGERS, HONG KONG
“The markets entered the election tally, as if they expected a ‘blue wave’ or at least a definitive victory for Biden.
“However, the count so far suggests the results will be much closer than that, with the key state of Florida appearing to be going for Trump. This raises the prospect that we might get a contested election, or at least one where we don’t get a result for some time, because the votes take a long time to be counted.
“This higher uncertainty has seen a lot of these early trades reverse – with the dollar appreciating and markets pulling out of opening highs… this caution will likely continue until we get a more indication. clear of the result. “
JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA
“The blue sweep argument is about an immediate stimulus, like a sugar high. Trump is doing better than investors thought is the ultimate chaos. If you’re expecting a blue sweep and all of a sudden Trump looks competitive and looks like he can win, then you’re throwing caution to the wind. If Republicans start winning Senate seats again and you have a stalemate, the market could collapse. But in the longer term, you could lead to lower taxes and higher stock prices as the recovery continues.
“S&P futures favor high sugar, a blue sweep is great. The market is thinking of the shorter term. The market favors certainty, and Trump appears to be doing better than investors thought. “
Compiled by the Global Finance & Markets Breaking News team; Editing by Richard Pullin and Jacqueline Wong
Original © Thomson Reuters
Originally posted 2020-11-03 23:16:17.