Por Divya Chowdhury
Oct 14 (Reuters) – US stocks, 10-year bond yields and the dollar against the yen will fall if the election result is delayed much more than a couple of weeks after November 3 or if the election is challenged. result in the Supreme Court, a fund manager and strategist said Wednesday.
US equity markets could fall 5-10%, “depending on how bad the news is,” Binay Chandgothia, a portfolio manager at Principal Global Investors, told the Reuters Global Markets Forum.
Stephen Innes, global markets strategist at AxiCorp in Bangkok, said he expected the S&P 500 to fall by around 10% “as competition between corporate tax hikes versus stimulus is unprecedented.”
The S&P 500 is up 8.7% this year, helped by trillions of dollars of fiscal and monetary policy stimulus, and accumulated a 4% rise in October.
Chandgothia, whose company manages about $ 490 billion in assets, said it expected the 10-year yield to drop by 20 to 25 basis points “if the electoral uncertainty drags on.”
The 10-year bond yield is at 0.7173%, down from a low of 0.5040% on August 6.
Chandgothia said he expected the US dollar to appreciate against emerging market currencies, the euro and the British pound, but to weaken against the Japanese yen, without detailing how much.
Innes said it was “short the dollar / yen” as a non-consensual trade, adding that he expected the yen to hit the 100 level against the dollar.
The dollar index has lost about 9% since its 2020 peak, also in March.
Democratic candidate Joe Biden has an eight percentage point lead over Republican President Donald Trump in Michigan, according to Reuters / Ipsos polls of the disputed states.
“The best hedges for an underperformance are gold, 30-year US Treasuries and the dollar,” Chandgothia said.
“Of these, we are currently long in dollars, and may soon add 30-year Treasuries.”
(The interviews were conducted on the Reuters Global Markets Forum, a chat room on Refinitiv Messenger. Register here: https://refini.tv/33uoFoQ)
(Report by Divya Chowdhury in Mumbai, Additional Report by Aaron Saldanha, Edited in Spanish by Javier López de Lérida)