A Trump victory is the "most favorable outcome for equities," said a team of analysts led by Dubravko Lakos-Bujas, the chief US equity strategist.
- The S&P 500 could rally about 14% to hit 3,900 if President Donald Trump wins the November election, according to JPMorgan.
- A Trump victory is the "most favorable outcome for equities," a team of analysts led by the chief US equity strategist Dubravko Lakos-Bujas said in a note on Friday.
- They said a "Blue Sweep" scenario would be mostly neutral for equities in the short term, because more federal stimulus could be offset by rising corporate taxes.
- JPMorgan said it expected energy, financials, and healthcare to see the biggest moves, as both Joe Biden and Trump mentioned the sectors specifically on their campaign trails.
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The S&P 500 could rise 14%, to 3,900, if President Donald Trump retains his position in the White House, JPMorgan analysts said on Friday.
A Trump victory could push the mega-cap index 300 points higher than the firm's base-case target for year-end, the analysts said. The S&P 500 stood at about 3,400 at Monday's close.
Markets have been preparing for a Democratic sweep and frontloaded stimulus to boost the economic recovery. But JPMorgan analysts led by Dubravko Lakos-Bujas, the chief US equity strategist, said they expected "an 'orderly' Trump victory as the most favorable outcome for equities."
On the other hand, "a 'Blue Sweep' scenario is expected to be mostly neutral in the short term, as it would likely be accompanied by some immediate positive catalysts (i.e. larger fiscal stimulus / infrastructure) but also negative catalysts (i.e. rising corporate taxes)," the team wrote.
JPMorgan said that after analyzing Twitter sentiment and comparing it with traditional polling data, it found more evidence that the race was tightening, while traders seemed to be minimizing the risk of a contested election.
The bank said it expected the energy, financials, and healthcare sectors to see the biggest price swings, as both Trump and Joe Biden, the Democratic nominee, referred to them on their campaign trails.
JPMorgan has created baskets of stocks that bet on winners from either Democratic or Republican victories in November. A glance at the top components of both baskets showed that the Biden basket, including alternative-energy and green-tech stocks, was outperforming the Trump basket, with traditional energy and fossil-fuel companies, by 66%.
"Given the large divergence between these two baskets (i.e. similar to momentum/value), coupled with our expectation that COVID-19 headline risk likely declines post-election, we see an increasingly compelling case for Value in the coming period," the analysts said.
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