This is the biggest fear of the US presidential election.

According to the global strategist of Invesco, the volatility of the markets last week is due to high uncertainty.

Apart from the contested result, any final result, especially a total victory, would be good news for investors.

According to the analyst, if either party wins both Congress and the presidency, they can easily carry out their plans, but in the case of a Democratic victory and a Republican Senate, any stimulus package or other change in fiscal policy will be You can put it indoors with more difficult negotiations. The worst case scenario would be an outcome that would be questioned by either party, as it would trigger a long-running legal battle and make the implementation of a possible stimulus package or any political decision impossible.

Currently, investors are valuing a total Democratic victory, for which, in addition to acquiring the seat of the Senate and the Presidency, they will also maintain the majority in the House of Representatives, thus obtaining total control of Congress.

This would give Democrats immediate leeway, for example, to vote for a massive stimulus package, which could result in a steeper yield curve and a weaker dollar, bringing a recovery in industries as a whole that it is expected to support Biden, like green energy.

If there is a Democratic victory in the Senate, I think interest rates will go up and that will be a great help to financial companies.

said Peter Bortel, partner at Bortel Investment Management.

The two-month period ending on Wednesday was created by JP Morgan

“Biden Basket” was up 4.5 percent, while “Trump Basket” fell 16 percent.

In Biden’s basket we find mainly stocks of companies that deal with alternative energy, electric cars and infrastructure development, while in Trump’s basket we find companies that deal with defense and the production of fossil fuels in addition to the banking sector.

Stocks were volatile last week, mainly because more recent polls measured tighter results and the less likely scenario already materialized in 2016, as well as continued uncertainty about the acceptance of the stimulus and the worsening coronavirus epidemic.

Consequently, it is not surprising that, according to research conducted by Lyxor Asset Management on October 21, hedge funds “cautiously position” democratic victory.

Esplanade Capital’s chief investment officer said his hedge fund has bet on solar energy stocks, but has “some thoughtful and creative hedging” alongside him so he doesn’t take an “unreasonable risk” with his fund.

What is the worst result?

The worst thing for the markets would be if there were still doubts on Wednesday about who would rule the United States for the next four years.

In this case, according to an analyst at Invesco, panic is likely and investors will flee to a safe haven until the situation clears up, such as short-term and long-term US government securities, gold, yen. Japanese and the US dollar.

A shared outcome, such as Biden’s victory with the Democratic Senate, would also cause a lot of uncertainty.

Markets see the full Democratic victory as the vote on a major stimulus package that will help keep the economy afloat in the event of an epidemic. The stimulus package could raise equity prices as an immediate effect and help lift hitherto non-cyclical stocks.

With a total Democratic victory, a much bigger tax package could come along

said Anthony Saglimbene, global strategist at Ameriprise Financial.

However, in addition to short-term benefits, a democratic victory is also a concern for equity investors. A big problem in tax policy, Joe Biden’s program includes raising the corporate tax rate to 28 percent, which could lower corporate profits and create a tighter regulatory environment.

A Biden victory could also be negative for the dollar, if the administration gives a calmer voice to China and its trading partners, it could also increase the better growth prospects of other countries.

On the other side is the “ status quo, ” if Trump’s victory could result in a more modest stimulus package because Democrats remain in the majority in the House of Representatives, but the horror of a tax increase corporate weighing on companies like the sword of Damocles would disappear.

A really big surprise could be the total Republican victory, in which the Republicans would win Congress in addition to the presidency, but that could happen with very little probability.

JP Morgan called Trump’s victory last week the most favorable outcome for equity markets.

To be sure, since Trump’s 2016 election, the reigning president has become a great friend of the market, seeing stock market developments almost on his own merits and introducing a serious package of support for stocks with tax cuts. corporate and tariffs. The United States stock market is up almost 53 percent since 2016.

Markets must figure out what will change in the new administration

said Paul Christopher, global strategist at Wells Fargo Investment Institute

The S&P 500 was up nearly 1 percent this year, up from 5 percent last week.