The Three Election Wild Cards

Alternatively, a Trump victory without a GOP Congress could be similar to a Biden victory without a Blue Wave, meaning more delays for federal aid. That would be troubling for equities and commodities. A split government could also influence how the White House deals with China, the European Union and other trading partners -- all of which could introduce risk to markets.

JPMorgan Chase & Co.’s Chief Equity Strategist Dubravko Lakos-Bujas is eyeing the S&P 500 at ~3,900 in an “orderly Trump victory as the most favorable outcome for equities.”

Tech Threat

Consensus view: A Blue Wave will hurt technology stocks, while a Trump win will help them

Non-consensus view: Big Tech’s dominance is over, regardless of who’s in the Oval Office

While a Blue Wave is considered pro-risk, potential antitrust action alongside rising corporate taxes would weigh on tech makers and suppliers in the U.S. and Europe. Asian tech could be an alternative given the lower valuations, earnings momentum and strong balance sheets, according to Societe Generale strategists.

Among the companies that could entice investors are Alibaba Group Holding Ltd., Tencent Holdings Ltd., Taiwan Semiconductor Manufacturing Company and Samsung Electronics Co. Ltd., the biggest tech names on the MSCI Emerging Markets index. The MSCI Asia Pacific Information Technology Index gained 1.5% in October compared with a roughly 1.5% decline in the Nasdaq 100.

Asia technology stocks avoided the September swoon in U.S. peers

Meanwhile, a Trump win would likely bring less regulation and lower corporate taxes from about 21% to 15%. While that could keep Big Tech humming, a Trump second term also presents a double-edged sword. He’s openly attacked Amazon.com Inc. and Facebook Inc. for anticompetitive behavior and could step up his critique.

Oil Whims

Consensus view: A Blue Wave hurts oil, while a Trump victory is crude-positive

Non-consensus view: The only sure thing for oil is more volatility

In the short term, oil could rally on a Blue Wave, which the market is positioning for (as shown in the chart below). JPMorgan strategists estimate that a Biden win and Democrat Senate could add as much as 15% to crude prices on a combination of dollar weakness and fiscal stimulus. Eventually, however, the market will have to confront Biden’s plan to transition to renewable energy. And most Blue Wave policies could raise U.S. production costs, limiting the growth of shale supply, according to Goldman Sachs.

But these risks will play out over years and decades. Immediately after the election, oil’s more likely to follow broader risk assets.

Trump has been a strong advocate for American oil and has brokered the biggest-ever voluntary output cuts by OPEC members. A second term could boost crude benchmarks, but also introduce more volatility. OPEC members facing their own domestic pressures are less likely to comply with further output cuts. And tough talk on trade and diplomacy -- like Trump’s dealings with China -- could hamper crude’s gains.

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