Election Jitters: Contrarian Views on US Stocks
As the US presidential election draws near, investors are bracing themselves for potential market volatility. While many expect a Trump victory to boost US equities, two Wall Street giants, Bank of America Corp. and Citigroup Inc., are sounding a different alarm.
A Trump Win: Inflation and Rate Hikes Ahead?
Michael Hartnett, strategist at Bank of America Corp., warns that a Trump White House victory, accompanied by Republican majorities in Congress, could lead to tax cuts and immigration controls. This, in turn, would drive inflation and interest-rate hikes, making it a risk-off scenario for stocks. Hartnett’s contrarian view clashes with the prevailing sentiment that Trump’s corporate tax cuts will benefit company earnings.
A Harris Win: Tech Stocks to Rally?
On the other hand, Hartnett recommends buying any dips following a Harris victory, as this would maintain the status quo for tech stocks to continue their upward trend. He suggests that a Harris win would be “best played via China tech.” This view is echoed by Citigroup’s Scott Chronert, who sees a potential selloff resulting from a Harris victory, alongside a split Congress, as a buying opportunity.
Other Contrarian Calls
Hartnett also suggests buying bonds instead of gold if government spending is curbed, and snapping up European stocks if tariffs force the European Central Bank to cut rates faster than expected. These unconventional views may provide a fresh perspective for investors seeking to navigate the uncertain waters of the election season.
Economic Data Takes Center Stage
Investors are also keeping a close eye on the monthly payrolls report, due later today, and the Federal Reserve policy meeting next week. Swaps markets indicate reduced bets on another interest rate-cut, as recent data underscores a resilient US economy.
Staying Ahead of the Curve
As the election season heats up, investors would do well to consider these contrarian views and stay agile in their investment strategies. By being prepared for unexpected market shifts, investors can position themselves for success in the face of uncertainty.
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