- JPMorgan Private Bank’s Monica DiCenso told Bloomberg on Friday that the stock market won’t see the bullish outcome it’s expecting from a Biden win unless there’s a blue wave victory.
- The head of US equity strategy said that it will be difficult for Biden to pass a large stimulus bill without Democratic control of the Senate.
- The stimulus would also offset higher corporate taxes that are likely under a Democratic administration, she said.
JPMorgan Private Bank’s head of US equity strategy told Bloomberg on Friday that the stock market won’t see the bullish outcome it’s expecting from a Joe Biden victory unless there’s a full blue wave outcome.
“It does appear increasingly likely that we see a blue wave and I think that is what the market is pricing in right now when you see equities continue to move,” Monica DiCenso said.
The strategist explained that it will be much harder for Biden to pass a large stimulus bill without Democratic control of the Senate, and said: “I really do think you probably need the blue wave for the real bullish outcome that many people are talking about to come to fruition.”
DiCenso added that the stimulus, combined with continued low interest rates, will be the “perfect backdrop for equities over the near to intermediate term.”
While some investors are nervous that a blue wave will be negative for stocks because Biden’s corporate tax hikes will crush company earnings, DiCenso said the stimulus spending will offset higher taxes.
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The strategist suggested investors seek out cyclical stocks like industrials and healthcare to prepare for this outcome.
“Focus on sectors that would benefit from the stimulus spending and just stimulating the economy in general that might offset some of the impact of the rollback of tax cuts,” she said.
Industrial stocks have outperformed in the last few months and will probably continue to outperform, she said. The health care sector tends to be defensive and is also innovating on the vaccine front right now. “It’s a great place to hide if you’re a little worried but want some leverage to the innovation story,” DiCenso added.