Morgan Stanley analysts have predicted that there could be heightened volatility in the financial market after the United States general elections. According to the analysts, election results might be delayed translating to uncertainty and speculations which could affect the momentum of the financial market.
Morgan Stanley Wealth Management’s Head of Policy Monica Guerra and Morgan Stanley Wealth Management’s United States Policy Strategist David Kohen have both predicted increased volatility in the markets due to the elections.
In a recent statement, the executives noted that market volatility stems from unpredictable voter decisions and economic uncertainty. With elections due in the next couple of weeks, the financial market is expected to react.
Morgan Stanley analysts predict delay in election results
The analysts mentioned that the elections may encounter delays, which could lead to uncertainty and speculations. Citing data from previous elections, the duo stressed that the uncertainty accompanying the period may create market shifts. These market shifts, according to the executives, would be triggered by investors.
The duo said that the uncertainty in the period could bring about an increased level of short-term volatility in the financial market. The analysts referenced data from the 2020 election to back up their claims. During the period, the CBOE Volatility Index (VIX) saw a 40% spike for three days. The index is used to calculate the fear gauge in the financial market. The spike lasted three days and stopped only after the election results were released.
The analysts note that the major factor that slows down election results is the counting of mail-in voters from different states. According to Guerra and Kohen, 23 states will count their ballots on election day, while 15 others will begin to count them after the polls close on election day.
The analysts also believe that the close race between Democrat candidate Donald Trump and Republican candidate Kamala Harris could be another factor. They believe that results in swing states vital in winning college votes could be the deciding factor. Hence, it might lead to a delay or might involve legal issues. The analysts believe this election could be on for days or even weeks.
Investors should focus on market performance and the business cycle
Morgan Stanley analysts have urged investors to focus on the business cycle. This is because it is more integral to the market performance than the election. Analysts have also predicted a close race between Donald Trump and Kamala Harris as they continue their campaigns to sway more voters.
According to a poll conducted by CNN on October 25, Donald Trump and Kamala Harris are in a tightly contested election. The poll results showed both candidates had split 47% of voters. The previous poll by CNN showed a slight difference between the candidates. While Trump got 47% of the voters, Harris got 48%.