The S&P 500 could spike 54% after the election, with global portfolios still showing below-average stock holdings, JPMorgan says

• The bull market in stocks is set to resume after Tuesday's presidential election, regardless of the outcome, JPMorgan said on Friday.
• Once election uncertainty subsides, investors will be more comfortable adding to stocks, the bank said.
• It said the S&P 500 could rise 54% from current levels, based on investors' below-average allocation to stocks.
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US stocks are set to surge once Tuesday's presidential election is in the rearview mirror, according to JPMorgan.

The bank's analysts told clients on Friday that they believe the bull market in stocks will continue regardless of the outcome, as it will remove the uncertainty that has been looming over investors for months.

JPMorgan said it sees 54% upside potential in the S&P 500 from current levels, based on investors' average under-allocation to stocks in their portfolio. The bank added that October's sell-off in stocks represented a solid buying opportunity for equity investors over the longer term.

The bulk of JPMorgan's call hinges on the reading that global nonbank investors' holding of stocks is at 39.73% of their total portfolio, below the post-financial-crisis average of 42% and significantly below the cycle high of 47.6% in early 2018.

Read more: Stifel asked its analysts to identify stocks most likely to be positively or negatively affected by the election results. Here are the dozens of stocks to buy or avoid in each of the 3 outcomes.

"The equity appreciation needed to shift the implied equity allocation of non-bank investors globally from the current 39.73% share to the post Lehman high of 47.6% is 47% for the MSCI All Country World Index and 54% for the S&P 500," JPMorgan said.

JPMorgan's assumption is based on additional easing policies from central banks around the globe, though fiscal stimulus measures could also help jolt stocks higher, it said.

And while a resurgence of COVID-19 cases and lockdown measures could be a short-term negative for stocks, it could also be a bullish catalyst in the medium to long term, as it could induce more fiscal and monetary stimulus, JPMorgan said.

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