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The stock market is sending signals that a Biden-led blue wave is getting less certain, says one Wall Street strategist

The stock market is sending signals that a Biden-led blue wave is getting less certain, says one Wall Street strategist

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  • While the polls suggest a blue wave victory is in reach for Democrats this November, the stock market isn’t so sure, according to a note from Evercore ISI.
  • Wall Street strategists have been forecasting that a blue wave would likely be positive for stocks on hopes of a large stimulus deal shortly after the election, which would help spur a surge in value and cyclical stocks.
  • But this week’s rotation out of value and into tech suggests that chances of a blue wave in November are less likely, according to the note.
  • Visit Business Insider’s homepage for more stories.

Wall Street is increasingly expecting a blue wave victory for Democrats this November after the polls close, which would likely lead to the reflation trade: a surge in cyclical and value stocks at the expense of technology and growth stocks.

But recent trading activity in the stock market suggests odds of a blue wave are less likely, according to a Tuesday note from Evercore ISI. 

Specifically, this week’s rotation out of small cap and value and into large cap and growth could be chalked up to declining odds of a Democratic sweep, according to the note.

The firm pointed to the October surprise in North Carolina’s Senate race between Republican Thom Tillis and Democrat Cal Cunningham as evidence for declining chances of Democrats overtaking the Senate.

“The Democratic ‘dream fiscal program’ odds are lower,” Evercore said as explanation for what is driving the rotation back into tech.

Read more: Jeff James has crushed the market this year thanks to a stock pick that’s soared 1,155%. He shares another bet he expects to deliver similar returns – and lays out 3 additional opportunities in tech.

The firm did concede that other factors could be moving tech stocks, including excitement

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Biden will win, polls say. But the stock market is sending a different signal

Biden will win, polls say. But the stock market is sending a different signal

PAUL BRANDUS



a man standing in front of a building


© AFP via Getty Images


With three weeks to go, President Trump’s re-election bid is in trouble. At least that’s what the polls show.

But it’s not what the stock market is signaling. Based on nearly a century’s worth of election-year data, Trump may yet win.

“A rising stock market tends to be a ratification of the present policies being satisfying to the investing public.” — Julian Emanuel, chief equity and derivative strategist at BTIG

Here’s the research, and it is compelling: Since 1928, whenever the S&P 500 Index (SPX) of the largest U.S. stocks has risen in the three months prior to a presidential election, the party that controlled the White House won 90% of the time.

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“If you think about it intuitively, it makes sense,” says Julian Emanuel, chief equity and derivative strategist for the investment firm BTIG who compiled the data. “Because a rising stock market tends to be a ratification of the present policies being satisfying to the investing public.”

History lines up squarely behind Emanuel. In 1928, for example, President Calvin Coolidge, a Republican, chose to retire, but stocks rose between August and November. It was the last full year of the Roaring ’20s and helped lift the new GOP standard bearer, Herbert Hoover, into the White House.

Four years later, the reverse occurred. The Great Depression, which began in the fall of 1929, dragged down stocks — including between August and November 1932 — and Hoover was crushed by Democrat Franklin D. Roosevelt.

In fact, there have been six presidential years since 1928 when the S&P 500 fell in the three months before election day. All six times, the party in the White House lost.

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