The recent assassination attempt on former President Donald Trump sent shockwaves around the U.S. and globally. As the country grapples with the potential implications of this event, Wall Street strategists are keenly analyzing how it might influence the upcoming election.
The attack has not only intensified security concerns but also injected a new level of uncertainty into an already tumultuous political landscape. To shed light on the possible repercussions, five prominent Wall Street strategists released notes providing their insights on how the shocking incident could shape voter sentiment, market volatility, and the broader electoral outcome. Their perspectives highlight the complexities and potential ramifications of this unprecedented situation.
What are the implications for the election?
Citi: Analysts at the bank assessed some historical episodes and the impact on polls, noting that some suggest a boost to polls, “although the immediate impact is not huge and at times partly reverses.”
“Market-wise, we may see further progress in what are perceived to be the Trump election trades that do not conflict with the current Fed story,” wrote the bank. “Steepeners offer the most attractive opportunities; other trades may have to wait. In equities, financials should outperform the market. The FX trade requires patience as softer US data is leading to a weaker USD.” Overall, they believe Monday’s price action will be a litmus test to see how much of a Trump victory is already priced.
Macquarie: “Today’s rising tide of political disorientation and polarization has historical parallels with 1968, the year when RFK, a democratic presidential candidate, was assassinated and MLK was murdered,” wrote the firm. From an economic perspective, the firm said that “as chances of a republican sweep increase, investors are confronted by a mix of short and long-term uncertainties.”
“In the short-term, republican agenda seems to focus on cutting taxes, reducing transfer benefits, constraining immigration, deregulating industries, and tariffs. All of these are likely to raise deficits, aggravate inequalities and raise inflation. But, at the same time, these might boost short-term corporate ROEs and selectively benefit a few industries (e.g. healthcare, energy).”
Gavekal Research: “One of Gavekal’s go-to lines is that money managers are not paid to forecast, but to adapt. This is especially true when it comes to political events,” wrote the firm. With this in mind, the firm feels that the events of the past few weeks — Joe Biden’s poor debate performance and Saturday’s attempted assassination of Donald Trump — “all but guarantee a strong Republican performance in November’s US elections.”
BTIG: The firm described the assassination attempt as striking “at the heart of our Democracy,” with the potential to materially alter the electoral landscape.
When it comes to the implication for the election, the firm says that “at the highest level, the events over the weekend: (1) bolster our belief that Trump should be viewed as the favorite at this juncture, especially as it could expand the already gaping enthusiasm gap; and (2) reinforce our view that President Biden is likely to survive recent calls to step aside as the nation’s collective attention shifts.”
UBS: When assessing the election, the investment bank said that in the near term, they expect reduced formal campaign activity as security measures are increased and campaign messaging is reviewed, noting that the Biden campaign has already paused communications.
“A key question will be how the assassination attempt affects swing voter Attitudes,” stated UBS. “President Reagan saw an immediate increase in his popularity following the attempt on his life in 1981, though the bump in support ebbed within three months following the incident.”
Furthermore, the bank said the attempted assassination “adds a new layer of complexity to an already tumultuous election season. We have said that investors should not make major portfolio swings in response to campaign developments or in anticipation of any particular election result, and that applies in this case too.”