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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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A Wall Street strategy chief says the market is flashing bullish signals as more stocks start to rally

A Wall Street strategy chief says the market is flashing bullish signals as more stocks start to rally



a man wearing a suit and tie: CNBC TV


© CNBC TV
CNBC TV

  • Miller Tabak’s chief market strategist told CNBC on Friday the stock market is signaling it has upside potential before Election Day. 
  • Matt Maley cited the outperformance of the Russell 2000 index and said small-cap stocks and chip stocks have room to grow. 
  • He’s less optimistic about the market in the long term, however. A second wave of the coronavirus and an expensive market could be bearish after the election, he said. 

Matt Maley of Miller Tabak  told CNBC on Friday that the stock market is signaling it has upside potential before Election Day.

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The chief market strategist said he is watching the recent outperformance of small-cap stocks. As of Thursday, the Russell 2000 small-cap index was up almost 6% week-to-date, compared to a roughly 3% gain in the S&P 500. The broadening out of the stock market rally, which was previously dominated by mega-cap tech names, is bullish, he said. 

Chip stocks have also been a leading indicator for the market recently, he said. If they rally further, it will be bullish for the market at least until Election Day, the added. 

Institutional investor strategy based on the time of year could also push the market higher, he said.

“We’re in the fourth quarter of the year — institutional investors, if the market keeps rallying, no matter what they think of the long-term value of the marketplace, they have to be in the market and that could push things higher,” Maley said. 

He added that small-cap stocks and chip stocks are enticing right now. Investors can begin to rotate some of their holdings in large technology stocks, which may be a slightly overbought, into chip stocks and cloud computing stocks. “We have a long way to go” in those smaller technology names, Maley

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