It’s no secret that Wall Street tends to favor a Republican president. Back in early February, the stock market rallied near all-time highs as Trump looked unbeatable. No doubt, the president’s commitment to deregulation and tax cuts helped push the stock market higher during his tenure.
Then the pandemic happened.
Millions are now unemployed and the economy is on life support. Many disapprove of how Trump handled the health crisis. Even Republicans. Former Marco Rubio advisor Alex Conant said:
approval rating has slumped since March and direct polling puts him way behind Biden.
The Economist data is particularly dire, predicting Trump will losing the key battleground states of Florida, Pennsylvania, and Michigan. Those are states in which he beat Clinton in 2016. The Economist estimates are based on polling data, as well as economic and demographic figures.
Expect Dow Jones volatility going into the election
The election cycle is likely to inject more volatility into the stock markets going into November. But that could ultimately open up some buying opportunities for long-term investors. Speaking to CNBC, Shannon Saccocia at Boston Private Wealth CIO explained:
If you think about what could happen between here and the November elections, there probably are going to be several opportunities to add to your equities position.
She went on to say there is “no way” equity markets won’t move higher, given the sheer volume of monetary and fiscal stimulus.
And while these shock poll numbers might spook traders for a day or two, money managers are probably comfortable with a Biden presidency. Back in January, Wall Street was certainly nervous about Elizabeth Warren or Bernie Sanders in the White House. But they were neutral on Biden – the moderate candidate.
Keep your eye on hedge fund flows
One more thing to watch this morning: hedge fund inflows are coming back.
$44 billion was yanked from hedge funds in March and April as panic swept the market. But new data shows that May saw the first uptick. Hedge funds saw $1.7 billion inflows last month in a sign that investors are coming back in from the sidelines.
That isn’t the whole picture though. Barclays predicts billions will be pulled from hedge funds before the year is out as volatility continues to plague the markets. Bloomberg’s Dani Burger reported this morning:
[Barclays] think $100 billion is going to be pulled from hedge funds for 2020. This is financial crisis levels. This is investors really turning away from the industry with so many wanting liquidity.
Elsewhere today, investors will be grappling with increasingly large outbreak numbers in states like Texas, Arizona, and Florida. Health experts say these regions should consider pausing their re-opening efforts.
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