Wall Street investors are closely monitoring the upcoming election, with many preparing for a potential red wave on Election Day. They believe that a Republican victory, particularly if former President Trump wins the White House and Republicans take control of Congress, will bring about significant changes in the economy. Erik Weisman, chief economist and portfolio manager at MFS Investment Management, stated that “directionally you will see something that rhymes with” the economic effect witnessed in 2016.
On the other hand, investors consider a blue wave, or a widespread Democratic victory, to be less likely. However, they anticipate that such an outcome could lead to increased government spending and higher borrowing costs. Despite this, a divided Congress and White House, regardless of the combination, is not expected to have a significant impact on the market.
According to recent polls, President Trump currently holds a slight lead over his Democratic opponent, Joe Biden, in several battleground states. Trump’s dominance is particularly evident when it comes to key issues such as the economy and illegal immigration, which are top concerns for voters in this election cycle. In a national NBC News poll, Biden trailed Trump by 23 points in terms of who would be better suited to handle the economy.
Additionally, Trump is viewed as more capable of securing the border, possessing the necessary mental and physical health to be president, dealing with crime and violence, being competitive and effective, and improving America’s standing in the world. These advantages contribute to his overall lead over Biden.
Overall, Wall Street investors are closely monitoring the election and believe that a red wave is the most likely outcome to bring about significant changes in financial markets. They anticipate possible effects similar to those observed in 2016 if Republicans regain control. However, they also acknowledge that a blue wave could result in increased government spending and borrowing costs. As the election draws near, market participants will continue to assess the potential impact of different election scenarios on the economy.
