JPMorgan Says Trump Win Could Spur U.S. Stocks, Dent Asia Assets

(Bloomberg) -- A surprise election victory by President Donald Trump next week could benefit U.S. equities and the dollar while hampering Asian assets, according to JPMorgan Chase & Co.

That’s based on market moves after Trump unexpectedly won the vote in 2016, according to strategists including Nikolaos Panigirtzoglou. Democrat nominee Joe Biden is currently leading in polls but Wall Street firms have recently cautioned against assuming he will beat Trump.

The JPMorgan strategists said it’s reasonable to expect an echo of the fallout from four years ago if Trump wins, such as a favorable market reaction for American equities compared with non-U.S. stocks, a decline in Asian currencies and the underperformance of Asian shares relative to global peers. They also see the potential for a rise in a trade-weighted gauge of the dollar.

“Asian assets are likely to be sensitive to a continued Trump Presidency as it would likely mean further U.S./China conflict on trade, technology and investments,” the strategists wrote.

While polls and prediction markets give Biden the edge, analysts also remember how Trump shocked many pundits and markets by defeating then-favorite Hillary Clinton in 2016. Some investors have positioned not just for a Biden victory, but also a so-called “Blue Wave” where Democrats take control of the Senate while retaining the House of Representatives.

Other assets might break away from the patterns seen in 2016. For instance, there’s less scope for gold to drop this time around, JPMorgan said.

There might be “some pressure for further steepening” and increases in 10-year yields though not of the same magnitude as four years ago, when markets were starting to price in the possibility of significant deficit-financed tax cuts, the strategists said.

Infrastructure initiatives haven’t been a focus area for the Trump campaign, suggesting less scope for a rally in copper compared to four years ago, they said.

©2020 Bloomberg L.P.