Investors are watching the polls carefully, trying to anticipate who might win the election. While many market enthusiasts are touting a Biden win as the most bullish scenario for markets, the chief equity analyst at JP Morgan, Dubravko Lakos-Bujas, disagrees. According to Lakos-Bujas and his research team, another (orderly) win by President Trump would be the most positive for stocks. After analyzing Twitter sentiment and comparing and contrasting it with traditional polling data, the JP Morgan team has found evidence that the race is tightening. Scroll forward here to 14:00 for my market predictions.
The chief equity analyst at JP Morgan is so convinced that the administration’s economic policies would be viewed positively by Wall Street, that he’s put a 3900 level target on the S&P by year-end should the President gain a second term. This would mean a more than 12% increase in the market between now and December 31st if Donald Trump wins.
I agree with a positive outcome for stocks under the assumption that this is an orderly Trump win. And, already there’s evidence that our economy is on the mend as we look to stronger retail sales numbers, improving consumer and business confidence numbers, lower unemployment levels and the expectation that the economy grew as much as 33% in the latest quarter. (The official number is due out from the government this Thursday.)
Stock picker and market researcher Adam Johnson of BullseyeBrief.com tells me he also believes the markets will react positively to a Trump win. Johnson has placed a year-end target of 3600 on the S&P IF Donald Trump wins next week, in part because of the psychological boost the market may receive.
“It’s really simple,” he tells me. “It’s a 20 multiple (PE) on earnings of $180 which is what we would have made if Covid-19 had never happened. And, considering that GDP was down 31% in the second quarter, but expected to be up 33% this quarter, our economy will have effectively returned to a level of normalcy.”
Meanwhile, Johnson is also gaming out additional scenarios including,
IF Biden wins the oval office but, the Senate stays Republican?
Stocks will eventually move higher. “The markets like gridlock,” he points out. “Biden is a stimulus guy but the Republicans will hold him back.” It won’t be as fast a rally, he warns, but we’ll eventually move up.
IF it’s a blue wave?
If Biden wins, AND the senate flips? Johnson says many investors may initially think, “Oh my god, this is terrible. We probably trade down 5-6% initially.” Nonetheless, he suggests a clean sweep by Dems could eventually result in additional stock market growth since there will be “more stimulus, more handouts for healthcare, and more infrastructure building.”
Bottomline – Trump is the best for the U.S. markets but, there are still ways to make money in all scenarios.