The likelihood of stability from a potential President Biden is balancing out his plans for higher taxes, according to Natixis Investment Managers.
The latest polls were forecasting a win for Democratic candidate Joe Biden at 52% compared to 48% for current US president Donald Trump.
Natixis IM head of global thematics and macro research, Esty Dwek, said while Biden had campaigned with an agenda of higher taxes, this would be countered by the predictability of a Biden presidency compared to Trump.
“The markets are under-pricing a Biden win with his policy of high taxes. Taxes will go up if Biden wins but there would be less uncertainty and that means a trade-off might balance things out and that’s why markets haven’t reacted so much,” Dwek said.
“It is a balancing act between the two things, there will be volatility and a correction after the election but not a massive sell-off.”
She warned, however, that investors should not “underestimate” Trump or his ability to get re-elected.
Meanwhile, Michael Power, global strategist at Ninety One, added a Biden win would also cause a rift within Trump’s Republican party.
“If Trump loses then it would split the Republican party and it would have a very hard time over the next few years. There would also be a wide-ranging investigation of Trump’s taxes and his links to Russia,” he said.
“I think Biden will win but it will be a very close call and Trump would likely cry foul. I forecast the Democrats will win control of the Senate and retain control of the House of Representatives so all three arms of government would be ruled by Democrats and the Supreme Court would become more liberal.”