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DJIA : Will Slump Regardless of Election Result

(Tue, 25 Aug 2020). A majority of Wall Street analysts expect the stock market to flatline or decline after November`s election, regardless of who wins. Market strategists are gearing up for a highly volatile, and likely contested, 2020 presidential election. Donald Trump has already suggested that mail-in voting could be rigged against him.

A majority of Wall Street strategists are predicting either a static or slumping stock market following November`s election, regardless of who wins. The outlook becomes even more pessimistic in the event of a contested election, with 80% forecasting a decline of at least 5%. A Biden victory would be more harmful to the stock market, but strategists think even a Trump win wouldn`t be overly positive. Wall Street strategists are predicting a stock market slump will follow November`s election, according to a new poll.

Only 25% of surveyed analysts expect a rally in the days following the presidential election, while 70% are forecasting either a downturn or a range-bound market. The gloomy predictions hold even in the event of a victory for Donald Trump, who has mostly been kind to the stock market since his inauguration in January 2017.

 

Wall Street Prepares for Market Slump

Speaking to CNBC, 20 high-profile stock market strategists offered bearish forecasts for the weeks and months following November`s poll. Seventy percent expect Joe Biden to reclaim the White House for the Democrats. Under this scenario, 50% of strategists expect the S&P 500 to drop in the first month after the election. Twenty-five percent expect a rally, while 20% expect a stable stock market.

Regardless of who the analysts picked for the election, eight are predicting a 5% decline for the S&P 500. Two are indicating a drop of at least 10%. Assuming that the S&P 500 remains at today`s opening level of 3,397.16, a 10% decline would bring it back down to around 3,000. This would take it back to where it was at the beginning of March when news of the coronavirus began harming the stock market.

Part of the negativity of the polled analysts comes from their expected results in November. Only 15% are predicting a clear, uncontested victory for Donald Trump. Assuming that he does win, 55% expect a stock market rally of around 5%. The situation worsens if November`s election is contested. Eighty percent predict a stock market decline in such a scenario, with 25% expecting the fall to exceed 10%.

 

Trump Preparing to Contest Close Election

It may seem unlikely, but there`s more possibility of a contested election than in any previous presidential vote in recent history. Trump has previously suggested that he may contest the election under certain circumstances. Then there are Trump`s tweets about mail-in voting. He has claimed that widespread postal voting would result in "the most corrupt election in our nation`s history."

November`s vote may be close. Polls are predicting a Biden victory, but they also predicted a Clinton victory last time around. If close, Trump may very well contest. More than any other outcome, this will almost certainly harm the stock market.

 

A Rough Ride Regardless

If November produces a clear Biden win, the polled analysts also expect the stock market to react disapprovingly. A significant reason for this is the belief that the Democrats will raise taxes. Some of the polled strategists believe that Biden`s approach to the coronavirus crisis could offset any adverse reaction to tax hikes.

Other analysts also think that the stock market doesn`t have much room to move upwards, even with a Trump win. Due to ongoing trade disputes (with China and Europe) and the coronavirus pandemic, the U.S. economy will continue to struggle. These circumstances could limit the stock market for the foreseeable future.

 

 

 

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