U.S. Investors Worry More About Election Than Covid Wave: Survey

The American presidential election is now the biggest worry among institutional equity investors, topping everything from a second wave of Covid-19 infections to renewed U.S.-China trade tensions, according to a survey by RBC Capital Markets.

Nearly three quarters of respondents said they’re worried about the November election, a greater percentage than those fretting about a second wave of the coronavirus or layoffs, or even a slower-than-expected economic recovery, RBC strategists led by Lori Calvasina wrote in a report June 24. The question, “what keeps you up at night?” saw the 2020 election as the most common answer.

While those questions didn’t specify the exact source of angst, Goldman Sachs Group Inc. analysts recently flagged the potential for earnings-depressing tax hikes should Democrats do well in November. The RBC survey showed rising concerns about President Donald Trump going down to challenger Joe Biden.

“Our survey picked up an important shift in how U.S. equity investors are thinking about a Biden victory,” Calvasina said. “Biden bears surged in our June poll, rising for the second survey in a row. 60% now see Biden as a bearish or very bearish outcome for the stock market, up from 24% in our December 2019 poll.”

Some 65% in the survey saw Trump’s re-election as bullish or very bullish for stocks.

However, policy experts at the Scowcroft Group have said investor concerns about a potential Biden presidency are misplaced, and suggested that a second Trump term might not be entirely bullish for the market. Previous predictions of stock-market gloom from presidential elections often haven’t panned out well for strategists anyway.

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NatWest Markets Plc global strategy desk chief James McCormick said in a note June 22 that concern among investors about a new wave of viral infections might soon shift to what the “worrying Covid-19 trends” might mean for the presidential election.

“This looks like a big risk for U.S. asset markets and the dollar as we head into summer,” he said.

The RBC survey was conducted June 15-22 and based on the input from 107 institutional investors, primarily U.S.-focused portfolio managers.

Some 56% of respondents said stock valuations were high or very high. As for the dollar, 47% expect it to weaken over the next six to 12 months, versus 17% who see it strengthening.

--With assistance from Christopher Anstey.

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Joanna Ossinger in Singapore at jossinger@bloomberg.net

To contact the editors responsible for this story:
Christopher Anstey at canstey@bloomberg.net

Ravil Shirodkar

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