Could Biden Winning in November be Good for Financial Markets?
JPMorgan believes that Joe Biden winning the Presidential election could be good for stocks, according to Markets Insider.
"The consensus view is that a Democrat victory in November will be a negative for equities," wrote JPMorgan analysts led by Dubravko Lakos-Bujas on Monday. "However, we see this outcome as neutral to slight positive."
"Given the current economic weakness, business recovery and job growth are likely to be prioritized over policies that could dampen economic growth and perhaps even jeopardize the desired 2022 midterm election outcome," Lakos-Bujas wrote. "As such, the degree of corporate tax reversal may ultimately be lower than currently discussed."
Biden's policy proposals such as increased infrastructure spending, lightening up on tariffs, and an increase in the federal minimum wage should be "net positive for S&P 500 earnings and largely offset the corporate tax headwind," according to the note
Furthermore, "history suggests that challengers to an incumbent typically campaign at an extreme only to converge to the center post-election." Biden's proposed policies were introduced prior to the coronavirus crisis, insinuating that there might be more of a shift than expected.
However, one of the biggest reasons that a Biden win in November would be bad for stocks is if the 2017 Tax Cuts and Jobs Act is reversed. Last month, Goldman Sachs said that rolling back the TCJA would reduce its 2021 S&P 500 earnings estimate by $20 per share to $150.
JPMorgan also stated that these stocks would benefit from a Biden victory: Tesla, Nikola, Johnson & Johnson, CVS, Caterpillar, Apple, Facebook, Alphabet, Twitter, and others.