With election day nearing, markets focus in on two likely outcomes
Main U.S. indexes rise; Dow out front, up ~0.6%
Utilities lead S&P sector gainers; Energy sole loser
Euro STOXX 600 index closes up 0.47%
Dollar, gold slip; crude down >5%; bitcoin up >1%
U.S. 10-Year Treasury yield jumps to ~4.29%
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WITH ELECTION DAY NEARING, MARKETS FOCUS IN ON TWO LIKELY OUTCOMES
With election day just over two weeks away, Bob Doll, chief investment officer at Crossmark Global Investments, believes that financial markets are now focused in on what appear to be the two most likely outcomes: either a Republican sweep or a Harris victory with a split government.
As Doll sees it, a Trump victory with Republican control of Congress increases the chances for lower taxes and deregulation, which he thinks stocks would initially cheer.
That said, Doll cautions that such an outcome would likely come with a less dovish Fed and the prospect for rising bond yields that could cap a post-election stock market rally.
Doll adds that the timing and size of trade tariffs are also a "wildcard."
Conversely, Doll says that a Harris win with a divided Congress would likely not have much impact on equities because government gridlock would limit the scope for significant policy initiatives.
"The same is true of a Trump victory with a divided Congress. However, a Democratic sweep would likely illicit a negative reaction from stocks as it would bring the prospect of higher corporate taxes and more regulation," writes Doll in his weekly "Deliberations."
In terms of sectors, Doll thinks homebuilders would benefit from the policies advocated by both candidates. However, he thinks they would react more favorably to a Harris victory.
He also believes that Trump's more restrictive immigration policies would push up wages and costs for industries dependent on immigrant work forces such as construction, retail, leisure and hospitality.
Tariffs would also leave retailers that source goods from China vulnerable.
On the flip slide, Doll thinks U.S. steel producers would be tariff beneficiaries.
Finally, although both candidates say they want to strengthen U.S. military capabilities, Doll believes that Trump is likely seen as better for defense spending and the shares of defense contractors.
(Terence Gabriel)
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