With the US presidential election at a stalemate, some investors are advised to prepare for "all outcomes" that could include a contested or unclear result. Vice President Kamala Harris, the Democratic contender for the top job in the world's biggest economy, holds a slim lead over former President Donald Trump, the Republican candidate, based on an average of national polls compiled by FiveThirtyEight. "We remain mindful that the polls are tight in the aggregate but reflect deep divisions on many issues and in certain demographics," RBC Capital Markets analysts led by Lori Calvasina, head of US equity strategy, noted in a report this week.
"We've been telling our clients we think they should go into next Tuesday prepared for all outcomes, and to wait and see how things unfold." RBC mentioned that US-based, long-only equity investors have not been making substantial adjustments to their portfolios ahead of the crucial vote, but there's rising concern about a disputed result and the duration it might take to achieve a definitive outcome. In the campaign's final days, Harris could benefit from "strong economic growth, a resilient labor market, slowing inflation, and a near-record equity market," remarked analysts at Wells Fargo Investment Institute.
Trump might secure an advantage from heightened geopolitical tensions, particularly in the Middle East, but "hard-to-price social issues cloud the picture and make voter turnout even more unpredictable than usual," WFII analysts indicated in a report Tuesday. Almost 48 million people have cast ballots in early or mail-in voting thus far, as tracked by NBC News.
The expectation is for a "close play at the plate," with several swing states making the outcome too close to call, WFII noted. "If results remain opaque days after the election, we expect increased market volatility that could provide investors an opportunity to rebalance portfolios and more closely align with our portfolio guidance," WFII observed. Betting odds currently favor Trump over Harris, according to data compiled by RealClearPolitics.
RBC mentioned that some investors are questioning whether markets are already "baking in" a victory for Trump. "While we wouldn't quite go that far, we do think some repricing for this outcome has started to occur based on the resilience of the US equity market on the back of a lackluster reporting season," the investment bank's analysts concluded..