The US elections finally deduct all three risk levels, where will US stocks go? _Sina Finance_Sina.com

Original Caption: US Elections Finally Deduct All Three Risk Levels, Where Will US Stocks Go?

Michelle Yu Chao original

The final sprint time for the United States presidential election. According to polls, former US Vice President Biden leads Trump with 52% to 42%. But looking back at the 2016 general election results, opinion polls cannot be said to be stable. Wall Street’s advice is: be patient and prepare for surprises. Be patient, surprises can be expected.

Let’s dedicate it layer by layer

First, if the November 4 election results are not available, there may be three levels of risk.

At the most basic level, there may be delays in the announcement of the results due to the inability to count the votes sent, but the final results will be announced within a few days. This is a benign risk.

Another danger: If the two parties have close votes, it can lead to disputes over the validity of the votes, which can lead to recount at the state level.GoogleThe proportion of search reevaluations has increased substantially.

Highest level of risk: either party refuses to accept election results, leading to legislative strife and government dysfunction. This layer can be called a crisis.Morgan stanleyGiven a prediction, the probability of knowing the outcome of the elections at this time is around 30-35%. If so, the legal battle is very likely.

Continue to deduce, if the outcome of the elections is uncertain, what impact will it have on the economy?

The consensus of several economists: The short-term postponement of the election results has a negligible impact on the economy, but the postponement of the election results of several weeks will directly slow down GDP growth.

Additionally, businesses will continue to postpone hiring and investing, and the burden on small businesses in the United States will increase; families large and small in the United States can increase preventive savings; And due to market pressures or concerns about credit losses, financing costs may increase.

However, if all goes well, we will know the final outcome of the election first thing in the morning on November 4 ET. This is equivalent to knowing the direction of the stock market. Because no matter who wins, as long as there is a result, the stock market will have a direction. The most feared is the lack of direction, the uncertainty that the market hates the most.

Once there are results, the market’s focus will immediately turn to the stimulus bill that has not yet been passed. Therefore, the initial impact of the US elections will depend on whether more stimulus measures will be introduced.

So, let’s take a look at Wall Street’s prediction on the stimulus bill. There are three situations:

Package 1

Biden win + Democratic Congress (that is, the “blue wave” that has always been talked about): If this is the combination, the market will introduce between $ 2 trillion and $ 2.5 trillion in stimulus funds, including US response measures to the new corona virus Additional funds. It will be approved upon inauguration on January 20, 2021. (Jeffries from the United States predicts Blue Wave is more likely).

Package 2

Biden wins + Republican Congress: In this case, it is estimated that there will be between $ 500 billion and $ 1 trillion in stimulus funds. It should be approved after the inauguration, but there will be some delays. In this case, there may also be a continuous blockage.

Package 3

The victory of Trump + the Democratic Congress is the status quo: 1.5-2 trillion of stimulus funds.

What will happen to the American stock market?

We see the general election approaching day by day, and the US stock market is experiencing a huge pullback day by day. With the VIX panic index rising to its highest point since June, it also has a negative impact on China’s A-stocks. Although 82% of the earnings per share of S&P 500 companies in the third quarter beat expectations by an average of 14%, they still cannot contain investor concerns that the new corona epidemic could spiral out of control. and the uncertainty of the general elections. Election uncertainty, like controversial ones, will inhibit investor decision-making, hijacking the market’s passive commercial atmosphere.

Let’s focus first on the US stock tech sector, where several major tech giants come together.The psychological market trend in the tech sector was already reversed in early September, whenNasdaqThe index tumbled 4.9% on September 3 and fell again 4.11% on September 8. Since then, the technology sector has fallen. Since this year’s epidemic, several major tech giants have enjoyed a substantial rebound under the flood from the Fed, allowing them to make several quarters of gains up front.

Now, everything is in the digestion stage and this stage can last for several months. But its fundamentals are still healthy, but Wall Street remains pessimistic about further increases in the P / E ratio. Obviously, it doesn’t matter if the news is “good” or “bad”, with the exception of a few stocks, everyone is selling. With the exception of Google GOOGL, almost every other big tech company, likeApple、Amazon,FULL BOARDFacebook、Microsoft、Netflix, Shopify, etc. All of these tech giants have come under selling pressure after the third quarter earnings report was announced.

Now mostidealThe situation is that the results of the general elections will be announced on November 4, and there is not much controversy, then the market will have a clear sense of direction. If Trump is elected, the stock market will be great and tech stocks usher in a second spring.

So if Biden is elected, what will happen to American stocks?

To a large extent, the market has fallen by the same amount it should have fallen before, and it has already taken in many of the new government’s attitudes that may not be as business-friendly. To be sure, everyone has been concerned that Biden will lead to serious corrections if elected.

Wall Street predicts that the “blue wave” that caused Republicans to lose their Senate seats may send the market back 5% to 8%, and there will be no serious corrections of 15% or more. There is a high probability that US stocks will fall first and then rise.

The important point is that the election outcome will not change the Fed’s monetary policy, and the Fed remains the backbone of the entire market.

Looking back at the time when Biden’s Democratic Party “blue wave” had the most serious impact on the market, it was roughly the period from September 1 to September 18, because Biden’s win percentage increased significantly to early September 1. At that time, the performance of industrial and materials stocks was 13% / 15% higher than the Nasdaq index and 7% / 9% higher than the S&P 500 index respectively. Tech giants like Facebook, Amazon, Apple, Netflix, Microsoft and Google are 9% behind the S&P 500.

At the same time, the performance of the impulse is 8% worse than the value. After Biden’s election, the same procyclical value stocks and reactionary price trends are expected to appear directly after the election, that is, industrial, materials, and value stocks outperform the market, while the growth category will perform poorly.

But it still has to be said that the early morning of November 4 shows that the votes of the two sides in the general election are equal, then the stock market will be worried. If the result of the general election goes through legal proceedings, the stock market will be even more troublesome. It wavered and fluctuated until the election result was announced.

In fact, everyone can stand by and consider whether to enter the venue after the general election. In the environment of low interest rates in the coming years, I personally believe that equity returns will continue to outperform cash and bonds, so I am optimistic about the medium and long-term trend for US stocks. And as long as the Fed continues to release water, then follow the trend. An important point to drive market prices is liquidity. Once the market has gone through this wave of corrections and the election dust has settled, the next cycle of opportunity can begin, so you can have cash on your hands.

The United States is arguing that the importance of a substantial increase in the trade deficit should not be underestimated. The consensus conclusion many economists on Wall Street came to is that President Trump’s trade policy and the resulting trade war have failed, adding to the failure of previous administrations to control the trade deficit. No matter which government comes to power in January next year, it must respond quickly and wisely to this situation to avoid a dollar crisis. They also believe that during the new corona epidemic, China has become a global growth engine. China also stated at the meeting that many of the long-term goals listed in the future plan are technology-oriented, which also benefits the technology sector. However, the trend of Chinese concept stocks will inevitably be affected by the ups and downs of the US stock market in the short term. You can hold a short-term trade of heavy stocks and light indices.

Finally, the hidden dangers of possible social chaos after the US elections still exist. I hope the friends of the United States pay attention to safety! ! ! From November 4 to January 20, the opening of a few months is still very long. Since this year’s epidemic, many internal problems in the United States have been highlighted. They cannot be overcome with a change in leadership. We don’t know what kind of turbulence will be experienced, but we must take protective measures to prevent problems before they happen.

In recent years, the upstarts of Internet Silicon Valley moguls have slowly taken over countries that once belonged to traditional American heavy industry giants such as the traditional Rockefellers. This is a division between the field of wealth within the United States. Remember a few days agoTwitterDoes he look like the CEO in the Congressional hearing? Homeless in the Bay Area? Bin Laden? Indeed, it does not appear to be a joke to many older Americans and their “precarious concern” about the “Islamization” of these tech giants. Therefore, if Trump loses this time, all his efforts will disappear.

In the book “Nervous States: Democracy and the Decline of Reason” (Nervous States: Democracy and the Decline of Reason), the British political economist David pointed out that the era in which reason is superior to feeling began the scientific revolution. , but now this The era is over.

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