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.
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%.
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. Here’s the response of White House press secretary Kayleigh McEnany to a recent question :
The President has always said he’ll see what happens and make a determination in the aftermath.
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.
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.