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A Democratic Blue Wave Is Looking More Likely. That Could Signal the End of Big Tech’s Market Dominance.

A Democratic Blue Wave Is Looking More Likely. That Could Signal the End of Big Tech’s Market Dominance.

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A resident wearing a protective glove drops a ballot into a ballot box at an early voting polling location for the 2020 Presidential election in San Francisco, California


David Paul Morris/Bloomberg

Investors are acting like Democrats have a better chance of winning since the contentious Sept. 30 debate between President Donald Trump and former Vice President Joe Biden.

A positive coronavirus diagnosis for Trump may have sealed the deal. The odds of a Biden win in November have increased to 67% from a pre-debate reading of 55%, according to Raymond James, citing Bloomberg data.

The odds of Democrats taking the majority in the Senate rose to 66% from 55%, Raymond James added.

That could all mean a rotation out of big tech stocks into cyclical stocks and investments that benefit from the expected extra stimulus a Democrat-led government would bring, says Raymond James’ Tavis McCourt in a research note.

Hopes for a big stimulus package—the Democrats had proposed a $2.4 trillion bill—have faded in and out over the last few days in a series of mixed messages from the White House. Trump at first demanded Republicans walk away from the negotiating table. Then he directed a series of smaller, more targeted deals, including one for the ailing airline industry.

On Thursday, House Speaker Nancy Pelosi said a smaller airline deal wasn’t in the offering without broader aid measures.

Raymond James looked at how various traders and macro funds are positioning themselves. They appear to be making a notable shift to smaller cap stocks and cyclical industries.

A Democrat sweep could mean higher tax rates—Biden has vowed to rework Trump’s 2017 giant tax cut. That could take 5% to 8% off annual EPS on an index level, Raymond James said.

Material stimulus could raise longer-term rates, while short-term rates

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