CNBC Election Outlook Survey

Our responses

We participated in a CNBC Asia survey last week on the expected market reaction to the Presidential election. Here are the survey results and our responses.

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Real Clear Politics Latest Betting Odds

CNBC: 20 strategists predict the U.S. presidential election - and how stocks will react

Here are our responses to the questionnaire from Tanvir Gill, CNBC Asia. Our answers are highlighted.

CNBC Questionnaire – Please answer the following set of questions. Your identity will remain anonymous.

Q1 What do you expect to be the outcome of election 2020?

A) Biden win 

B) Trump win

C) Contested election

Additional remarks: The betting markets and polls are tightening and a Biden victory is far from a certainty. More important to the outlook is control of the Senate, if the GOP retains control, the taxation agenda would be difficult to implement. Still, the regulatory environment for banks, healthcare and energy would deteriorate.

Q2 How would the S&P 500 perform 1 month following a declared Biden win?

A) Rally 5%

B) Decline 5%

C) Rally 10%

D) Decline 10%

E) Rangebound between +2% & -2%

Additional remarks: The term structure of S&P implied volatility is exceptionally steep given that the front month is above 20. Furthermore, skew (premium for out of the money options) is elevated. In other words, despite the S&P making a new high, the index volatility market is discounting a less market friendly outcome. If Biden wins and the D’s take the Senate, the first major move in 2021 will be lower as the taxation agenda takes shape.

Q3 How would the S&P 500 perform 1 month following a declared Trump win?

A) Rally 5%

B) Decline 5%

C) Rally 10%

D) Decline 10%

E) Rangebound between +2% & -2%

Additional remarks: Upside is limited given the lack of a market friendly second term agenda. The primary issue is avoiding the federal government attempting to tax their way out of the pandemic related debt. Trade and immigration policies will be a drag on economic output, regulatory and tax policy are positive; consequently, a Trump re-election is only moderately positive.

Q4 How would the S&P 500 perform 1 month following a contested election?

A) Rally 5%

B) Decline 5%

C) Decline 5% to 10%

C) Rally 10%

D) Decline more than 10%

E) Rangebound between +2% & -2%

Additional remarks: I will no doubt be working on the 2000 analog, though the macro environment is different. The key will be to separate the policy uncertainty from the end of a long cycle in 2020. I haven’t begun this exercise, if the polls tighten further I will though my comments on the index volatility market are applicable to this scenario.  

Q5 What would be your December 2020 target for the S&P 500?

A)      Above 3600

B)      3400-3600

C)      3200-3400

D)      3000-3200

E)      2800-3000

F)       Below 2800

Q6 What would the election outcome mean for US-China relations?

A) Under Trump (Top 3 points) - Much of what is coming out of the Trump Administration at present is political and will fade after the election is over. The trade deal is in both the US and more importantly, China’s interest. Consequently, 2021 will be a good year generally though the tech war will continue and intensify.

B) Under Biden (Top 3 points) - It will be difficult to remove tariffs or engage in other thawing of relations though the rhetoric is likely to be less bellicose. The tech war will continue and intensify.

Barry C. Knapp

Managing Partner

Director of Research

Ironsides Macroeconomics LLC



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