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JPMORGAN: The best case scenario for stocks is a Biden presidency with a Republican Senate

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  • JPMorgan analysts laid out which 2020 election scenarios would best serve the US stock market.
  • A Biden victory with a Republican-controlled Senate would boost markets by keeping Trump’s tax regime in place while eliminating his “randomly-timed disruptions from foreign/trade policy,” the analysts wrote.
  • Yet a full Democratic sweep of the Senate with a Biden win would bring markets’ worst-case scenario, as the party would likely usher in new industry regulations alongside corporate and capital gains tax hikes, the bank said.
  • The 2020 election cycle is the first to happen in the same year as a presidential impeachment, which “raises questions about Senate seat vulnerability” in several swing states, JPMorgan added.
  • Visit the Business Insider homepage for more stories.

A Joe Biden presidency would be better for markets than a second Trump term, but only if Republicans keep the Senate, JPMorgan analysts said.

The bank laid out its best- and worst-case scenarios for the “wildcard” 2020 elections in a Wednesday note. A Biden presidency with a Republican Senate would best serve markets as the Trump tax regime would likely continue, the analysts wrote. The 2017 Tax Cuts and Jobs Act boosted the historically long bull market, lowering corporate taxes and triggering increased stock buybacks.

A Biden presidency with a divided government would do away with Trump’s “randomly-timed disruptions from foreign/trade policy” while keeping his market-friendly economic policies, JPMorgan wrote.

But a Democratic sweep of the White House and Congress would hurt asset prices by ushering in fresh corporate and capital gains taxes, the analysts wrote.

Biden currently has a commanding delegate lead over Sen. Bernie Sanders of Vermont in the race for the Democratic nomination. The Democratic Party’s platform includes proposals that could disrupt the healthcare, communications, technology, and financial sectors. 

Read more: JPMorgan has developed an AI tool to measure how the coronavirus is damaging markets – and its findings suggest the plunge is nowhere near finished

Prediction markets currently give Biden a one-point lead over Trump after the former vice president notched striking victories through Super Tuesday. While polls in swing states favor Biden over Trump, the margin of error remains wide enough to render the race too close to call, JPMorgan said.

The 2020 elections are unique in that no past election year has included an impeachment. The impeachment trial and subsequent acquittal “raises questions about Senate seat vulnerability,” according to the bank.

The upcoming election also arrives as Trump holds a low approval rating despite record low unemployment. The president has repeatedly used rosy labor market statistics to praise his economic policy decisions, but the divergence between favorability and hiring data brings a new and untested variable to the race.

Trump’s handling of the coronavirus pandemic “further jeopardizes his standing” and could significantly lower his odds of reelection, JPMorgan said.

Now read more markets coverage from Markets Insider and Business Insider:

JPMorgan officially forecasts a coronavirus-driven recession will rock the US and Europe by July

Investors stockpiled a record $137 billion of cash in just 5 days as coronavirus fears sent them fleeing from risk

Buy these 12 cheap stocks to reap big dividend payments as the market recovers from coronavirus, BTIG says


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