John Normand, head of cross-asset fundamental strategy for JPMorgan, says it has some investors asking if it's time to steer clear and flock to safety instead.
"The US is the only economy now at the intersection of a second wave and political risk, which is why investors often ask whether US equities and the dollar should be underweighted in global portfolios now," he wrote in a note to clients. Normand says that an investor who adopted that strategy would miss out on the US' stronger-than-average economic growth and the trends benefiting the dollar. He says it also reflects an overly simplistic view of the political landscape, as a Biden administration might raise corporate taxes but its programs could also benefit several sectors.
"The most positive outcome would be a Biden victory alongside a Republican Senate, which implies fewer market disruptions from foreign policy and no change in tax policy," he wrote, adding that even a Democratic "blue wave" could be"Rather than underweighting US assets broadly, there is better risk-reward in owning tech/quality to hedge the second wave, only favoring North Asian equities and FX to hedge the virus plus a Democratic sweep, or just staying long gold,"...
That's something I don't like about trading goes up and down pretty quickly
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