The odds have started to shape up for a potential second term for President Donald Trump who is pitted against Democrat Joe Biden in the race for the White House, according to a quantitative strategist at J.P. Morgan Chase & Co. Betting odds that till some time back had Trump way behind Biden have fast changed and are now almost even because of a number of ongoing national and global issues, including impact on public opinion of violence around protests, as well as potential bias in polls.
J.P. Morgan has cautioned that investors positioned for a Biden victory could be left in the dust. This also brings back memories of the 2016 election when Hillary Clinton was a clear favorite but election results ended decisively in favor of Trump.
Odds Turning in Trump's Favor
Marko Kolanovic, the head of macro quantitative and derivatives research at J.P. Morgan, advised investors to prepare for a closer race than expected as it sees Trump's chances of being reelected rising lately. It has thus cautioned its clients to position themselves accordingly.
"We currently believe that momentum in favor of Trump will continue, while most investors are still positioned for a Biden win," the strategist, along with analyst Brad Kaplan, wrote. Kolanovic is known lately for his often prescient calls. The odds, which were so far in favor of Biden has fast turned, if not completely in favor of Trump, but are at least are now even. This is largely due to the impact on public opinion of violence around protests, as well as potential bias in polls.
According to Kolanovic, past research shows that there could be a shift of five to 10 points in polls from Democrats to Republicans if the perception of ongoing protests turns from peaceful to violent. People giving inaccurate answers could artificially skew polls in favor of Biden by 5 percent to 6 percent, he added.
The new odds also refresh memories of 2016 election when tallies seemed to favor Hillary Clinton all throughout but a state-by-state count that determines the election outcome, ended decisively in Trump's favor.
Trump Reelection to Help Investors?
Biden has been enjoying a wide polling lead all summer over Trump, who trailed his Democratic opponent by as much as 25 points earlier in August. Moreover, Trump has gathered immense criticism for the way he has handled the coronavirus pandemic and the deterioration in the market and economy that began in March, as well as his response to demonstrations and unrest over policing practices.
However, improvements in all these areas have once again started raising hopes for Trump for a second term at the Oval Office. Kolanovic said that investors shouldn't rule out such a possibility. Also Trump's chances rose substantially higher following last week's Republican National Convention.
Trump's reelection would possibly have big implications for investors who have been positioning for a less universally business-friendly approach from Biden, who is believed to be a candidate who would raise taxes on corporations and increase regulations on Wall Street. That said, some of the important drivers of the election in coming weeks include developments in the COVID-19 pandemic, which looks like it might subside as the vote nears, as expectations of a vaccine ahead of the November election are high now.