Joe Biden wearing a suit and tie: Mark Makela/Getty Images


© Mark Makela/Getty Images
Mark Makela/Getty Images

  • A Democratic sweep in November would place stocks on a rollercoaster ride through the end of the year, Morgan Stanley strategists said Friday.
  • US equities are among the few assets poised for a “detour” should a so-called blue wave take place. The market’s steady climb would reverse temporarily before correcting in 2021, the analysts said.
  • Stocks would initially dip on fears of higher corporate taxes and uncertainty around future stimulus, according to the bank.
  • Once the party can clarify its fiscal relief plans, a follow-up to March’s CARES Act and continued economic recovery can place stocks back on their upward path, the strategists added. 
  • Visit the Business Insider homepage for more stories.

A “Blue Wave” come Election Day can boost stocks, but only after bouts of strong volatility and a knee-jerk decline, Morgan Stanley strategists said Friday.

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Current polls suggest Democratic presidential nominee Joe Biden will beat President Donald Trump in November, and that the Democratic Party holds a strong chance of securing control of Congress. Yet US equities are among the few assets poised for a “detour” should such a sweep take place, the bank said in a note to clients.

While some assets such as Treasurys and oil would face a steady decline, an overwhelming Democratic victory would form a temporary deviation from stocks’ upward trajectory, they added.

The market’s immediate reaction will likely be negative, according to the firm. Fears of tax hikes will drive initial selling and lower earnings outlooks.

Read more: Bank of America lays out its scenario for how the next big top in stocks will form — and pinpoints the trigger that could cause a meltdown shortly after

The continued economic recovery would drive some derating of earnings-per-share multiples, posing a short-term risk until

Adds details, background

LONDON, Oct 9 (Reuters)Bond funds have seen the second-largest weekly inflows ever of $25.9 billion, BofA said on Friday, as the market continues to price in a Democrats victory in next month’s U.S. presidential election, which could mean even more fiscal stimulus.

“Blue wave election outcome (Democrats winning) has curiously flipped from consensus bear to bull catalyst in recent months,” the U.S. investment bank said.

Riskier high yield bond funds attracted $5 billion in the week to Oct. 7, the highest in 11 weeks, while government bond funds sucked in $3.8 billion, the largest inflows in 14 weeks.

Equity funds, meanwhile, attracted $4.4 billion, mainly driven by U.S. equities, BofA said, adding it expected the “top” in asset prices to come between U.S. election day on Nov. 3 and the inauguration of the new president in January 2021.

In the fourth quarter, it expects banks, energy and small cap stocks to rally, and 10-year Treasury bond yields to rise to 1%.

The bank also highlighted the likelihood of renewable energy stocks front-running a Democratic victory in presidential and Congressional elections, plus more fiscal stimulus, pointing to one solar energy exchange traded fund’s stellar performance.

Invesco solar ETF TAN.P has soared 255% from its March lows and gained 42% in the last month alone.

“A ‘blue wave’ clean sweep which could see Dems in control of the Oval, Senate and House is seeing money pile into renewables”, a London-based trader said.

(Reporting by Thyagaraju Adinarayan; Editing by Tommy Wilkes and Mark Potter)

((thyagaraju.adinarayan@tr.com; +44 20 7542 7015; Reuters Messaging: thyagaraju.adinarayan.thomsonreuters.com@reuters.net; Twitter @thyagu))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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By Ross Kerber and Matthew Green

BOSTON/LONDON (Reuters) – Five Democratic U.S. senators on Thursday asked BlackRock Inc

to justify why it rarely supported shareholder resolutions tied to climate change issues despite its increased focus on the environment this year.

The proxy voting record of the top asset manager is “troubling and inconsistent,” according to a letter sent to Reuters by the office of U.S. Senator Brian Schatz of Hawaii and signed by four others.

In a statement sent by a spokesman, BlackRock said its work on behalf of clients includes both voting and engagement, or talks with corporate managers. It cited certain negative proxy votes cast this year and noted the company now more often publishes details about votes.

“We are currently reviewing our engagement priorities and voting guidelines,” BlackRock said.

BlackRock CEO Larry Fink in January had vowed to press companies to do more to combat climate change, underscoring the shifting moods of clients and reflecting new money pouring into sustainable investing strategies.

But a pair of recent studies found that BlackRock supported climate-related proxy resolutions only around 10% of the time this year, in line with its past record. Other companies took a more aggressive tack this year, notably the asset-management arm of JPMorgan Chase & Co.

Schatz’s letter cited one of those studies and noted how in several cases BlackRock’s support for management was decisive. He also wrote that BlackRock backed nearly all directors at oil, gas and utility companies.

Earlier on Thursday, speaking at an online news conference about efforts to limit climate change, BlackRock Vice Chairman Philipp Hildebrand said the company had appointed new leaders to its stewardship team.

“As a result of our commitment and these changes that were implemented during this transition year, you should certainly expect that our voting engagement outputs

FILE - Democratic challenger Cal Cunningham speaks during a televised debate with U.S. Sen. Thom Tillis, R-N.C., Thursday, Oct. 1, 2020, in Raleigh, N.C. Cunningham has admitted to sending sexual text messages to a California strategist who is not his wife. Cunningham apologized but said he would not drop out of the race in a statement to multiple news outlets late Friday.

FILE – Democratic challenger Cal Cunningham speaks during a televised debate with U.S. Sen. Thom Tillis, R-N.C., Thursday, Oct. 1, 2020, in Raleigh, N.C. Cunningham has admitted to sending sexual text messages to a California strategist who is not his wife. Cunningham apologized but said he would not drop out of the race in a statement to multiple news outlets late Friday.

AP

A race in North Carolina critical to control of the U.S. Senate has been thrown into turmoil over allegations of personal misconduct by Democrat Cal Cunningham, a married man who had an extramarital relationship this summer with a consultant.

Previously undisclosed text messages obtained by The Associated Press and additional interviews show that the relationship extended beyond suggestive texts, as was previously reported, to an intimate encounter as recent as July.

Republicans hold a 53-47 majority in the Senate, and the contest between Cunningham and Republican Sen. Thom Tillis has been among the most watched in the country, with polls showing a tight race and both parties investing heavily in the outcome.

Cunningham’s personal indiscretion offers a fresh test of whether voters will punish candidates for their private, consensual activity, and the answer they deliver could determine which party wields power in the Senate. The chamber has been a bulwark for Republicans under President Donald Trump, with Democrats in control of the House.

An Army Reserve lieutenant colonel with a wholesome appeal, Cunningham was widely viewed as the kind of recruit Democrats needed to make inroads in conservative-leaning Southern states like North Carolina.

Yet the text messages and interviews offer a glimpse that is at odds with the image of a devoted family man. A week ago, a conservative website, NationalFile.com, published text messages between Cunningham and Arlene Guzman Todd, a public relations

Newly obtained texts provide both a more specific timeline about their relationship as well as details that describe intimate encounters.

RALEIGH, N.C. — A race in North Carolina critical to control of the U.S. Senate has been thrown into turmoil over allegations of personal misconduct by Democrat Cal Cunningham, a married man who had an extramarital relationship with a consultant.

Previously undisclosed text messages obtained by The Associated Press and additional interviews show that the relationship extended beyond suggestive texts to an intimate encounter as recently as July.

RELATED: Cunningham pledges to stay in race despite sexually-suggestive text messages

Republicans hold a 53-47 majority in the Senate, and the contest between Cunningham and Republican Sen. Thom Tillis has been among the most-watched in the country, with polls showing a tight race and both parties investing heavily in the outcome.

Cunningham’s personal indiscretion offers a fresh test of whether voters will punish candidates for their private, consensual activity, and the answer they deliver could determine which party wields power in the Senate. 

The chamber has been a bulwark for Republicans under President Donald Trump, with Democrats in control of the House.

An Army Reserve lieutenant colonel with a wholesome appeal, Cunningham was widely viewed as the kind of recruit Democrats needed to make inroads in conservative-leaning Southern states like North Carolina.

Yet the text messages and interviews offer a glimpse that is at odds with the image of a devoted family man. 

A week ago, a conservative website, NationalFile.com, published text messages between Cunningham and Arlene Guzman Todd, a public relations strategist from California, that suggested a personal relationship.

The newly obtained texts provide both a more specific timeline about their relationship, which shows it was recent, as well as details that describe intimate encounters — not simply a digital exchange.