Why the election result is the 'best of both worlds' for stocks, according to JPMorgan's quant guru
- The outcome of Tuesday's election is "likely the best of both worlds for stocks," top JPMorgan quant Marko Kolanovic said in a note on Friday.
- The election of Joe Biden will likely result in an easing of trade wars, which will help boost global growth and corporate earnings.
- Meanwhile, if the Senate is controlled by Republicans, President Trump's tax cuts and deregulation initiatives will likely stay in place.
- Ultimately, Kolanovic expects the market to continue moving higher as investors increase exposure to stocks.
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The election of Joe Biden and potential Republican control of the Senate is "likely the best of both worlds for stocks," according to Marko Kolanovic, JPMorgan's global head of macro quantitative and derivatives strategy.
In a note on Friday, Kolanovic said markets should turn the page after Tuesday's election. The election of Joe Biden will help remove a sizable amount of uncertainty from the market, especially if the final results are not contested by President Trump.
Biden as president means investors should expect an easing in America's trade war, which should help boost global growth and corporate earnings, according to the note. Additionally, stock market volatility could be lower under a Biden presidency as there will likely be no market disrupting tweets that catch investors by surprise, Kolanovic said.
And if Republicans are able to retain control of the Senate, it would ensure that Trump's pro-business policies, like a lower tax rate and de-regulation initiatives, stay intact.
Control of the Senate will be determined in January when run-off Senate races are initiated.
According to Kolanovic, the stock market dodged a bullet with no so-called blue wave materializing.
"We think [a blue wave] would have been a more detrimental outcome for the market given a planned increase of corporate taxes and capital gain taxes, and potential for more progressive policies that would have negatively affected the market," Kolanovic said.
A rise in corporate taxes would have put a dent into corporate profits, while a potential rise in capital gains taxes would have led to the selling of momentum and growth stocks by investors who would seek to get ahead of the tax increase, according to Kolanovic.
Ultimately, Kolanovic expects the stock market to continue moving higher as investors increase exposure to stocks, as current positioning is moderate.