Prediction Markets Now Factor In 65% Chance Of Biden Victory. Here’s What That Means For Stocks And The Economy

Topline

Talk of a blue wave has heightened on Wall Street in recent days, as polls and prediction markets increasingly show former Vice President Joe Biden as the likely winner in the November election, and give Democrats a strong chance of taking control of the Senate while retaining their House majority. A blue wave would make passing legislation–including a highly awaited second stimulus bill–much easier, which could bolster economic growth, but not all industries would necessarily benefit.

Key Facts

Key Background

Wall Street experts, including StoneX strategist Vincent Deluard, have been predicting a blue wave for months, as polls increasingly point to waning support for President Trump. In July, Deluard said the outcome could hurt industries like big pharma and private insurers but benefit homebuilders and clean-energy providers. Meanwhile, Moody’s Analytics said in late September that a Biden victory would result in the biggest rebound in economic growth and employment.

Crucial Quote 

“We have always expected a blue wave to deliver more fiscal spending, as the Democrats are prioritizing economic recovery,” notes UBS’ Haefele on Tuesday. “This would counterbalance proposals for increased taxation, and we anticipate a blue wave would be neutral for markets overall.”

Tangent

PredictIt places the odds of CNN and Fox News naming a presidential victor within six days of the November election at roughly 80%–which seems fairly in line with the least disruptive contested election scenario, which should have a largely negligible effect on the market, according to LPL Financial Chief Investment Officer Burt White.

FURTHER Reading

Today’s 2020 Election Polls: Trump’s Favorite Pollster Has Him Down 12 As He Trails In Key Swing States (Forbes)

Stocks Recover After Trump’s Back And Forth On Stimulus, Claims He’d Sign Standalone Bill (Forbes)

Here Are 3 Ways A Contested Election Could Play Out–And What Each Means For The Market (Forbes)

Biden, Democratic Victories Would Be Best Outcome For The Economy, Moody’s Says (Forbes)