Many Wall Street strategists have come out in recent weeks with “research” indicating that a blue-sweep would be bullish for the economy and the stock market. See here and here for example.
Somebody’s been hitting the blue Kool-Aid hard. Since when are massive tax increases, burdensome regulation, and bigger government bullish for growth and the economy?
Thankfully, there is at least one strategist on Wall Street with a sober view.
JP Morgan expects a Trump victory to lead to double-digit gains in the stock market. In JP Morgan’s view, a blue sweep would be neutral for the market, but that’s likely a hedge. Being alone in a view and being wrong is how you get yourself fired on Wall Street.
Bloomberg reports:
One estimate from JPMorgan Chase & Co.’s chief equity strategist puts U.S. stocks in for a double-digit advance if Donald Trump keeps his office. A victory for the Republican candidate could push the S&P 500 to as high as 3,900 at year-end under the most optimistic case laid out by Dubravko Lakos-Bujas, the bank’s chief U.S. equity strategist. The figure, some 300 points above his base-case target for year-end, implies a 12.5% advance from the gauge’s Friday close. While a number of traders have come to consider a Democratic sweep followed by a prompt fiscal deal among bullish scenarios for the equity market, Lakos-Bujas disagrees, seeing Trump’s victory as the most favorable outcome. “A ‘Blue Sweep’ scenario is expected to be mostly neutral in the short term,” JPMorgan’s strategists including Lakos-Bujas said in a report dated Friday. “It would likely be accompanied by some immediate positive catalysts (i.e. larger fiscal stimulus/infrastructure) but also negative catalysts (i.e. rising corporate taxes).”