September was a rough month for stocks, with indexes and stock ETFs posting losses for the first time since March, after making fresh all-time highs at the beginning of the month.
But stocks and index ETFs rallied on Monday as investors developed optimism that lawmakers would compromise over a fresh stimulus deal, encouraged by the burgeoning number of White House related Covid-19 infections diagnosis and signs of pollsflagging economic recovery.
Now analysts are saying that there is yet another factor that could stabilize markets, fueling stocks higher once again: a Joe Biden win.
A Biden Boost?
With former Vice President Biden’s lead increasing in the polls and President Trump’s campaign put on hold to some extent due to his announcement that he contracted the coronavirus, investment strategists now believe there is a diminished chance of a contested election, something that has troubled investors and U.S. citizens recently.
“Polls are shifting from a close election and prolonged uncertainty to more a dominant Biden and clean succession,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA. “That is reducing uncertainty and increasing risk appetite.”
A poll disseminated this weekend, that was gathered between Tuesday’s debate and Friday’s news of the president’s infection, revealed that Biden’s national lead had exploded by 14 points, an increase of 6 points from before the debate. Biden also has notched two records for monthly fundraising in August and September, helping the candidate to beat Trump on the airwaves.
Analysts see this increase in the spread as potentially stabilizing for markets, with ETFs like the tech heavy Invesco QQQ Trust (QQQ) climbing over 1.5%, as the iShares Core S&P 500 ETF (IVV) advanced 1.26% on Monday, following across the board declines on Friday.
“Markets seem have lowered the chance of prolonged uncertainty post-November 3,” Barclays Plc strategists Ajay Rajadhyaksha and Shawn Golhar wrote in a note Sunday. “Given that Vice President Biden has been ahead in most polls, this suggests that markets are assigning a bit more probability to his win and a bit less to a close and contested outcome.”
In addition, with news that President Trump may be leaving the hospital soon, the Barclay’s analysts see a potentially bull case for stocks and index ETFs, unless things dramatically shift for the president’s health.
“Our baseline – of a risk-supportive macro outlook despite election uncertainty – will not change unless the president’s health unexpectedly takes a worse turn,” the Barclays strategists wrote.
For more market trends, visit ETF Trends.