Director of Research Matt Peron says when it comes to the U.S. election, the biggest risk for equity markets is not which party gets voted into office but whether the outcome is contested. So far, equities expect a clear winner on or near Election Day.

Key Takeaways

  • For equity markets, one of the largest risks surrounding the U.S. election is a contested outcome – particularly one that leads to a prolonged and uncertain battle for the White House and/or control of the Senate.
  • In recent weeks, U.S. stocks have climbed on optimism that there will be a definitive winner on or shortly after Election Day on Nov. 3. Such a result would provide clarity on potential policy going forward, helping reduce uncertainty.
  • Markets are also weighing the trajectory of the global pandemic and prospects for additional fiscal stimulus, which could lead to volatility. Longer term, however, we believe the resolution of the U.S. election, monetary and fiscal policy, and progress on COVID-19 vaccines could support equities.