Concerns about US elections are rising sharply among global fund managers: BofA
In October, the US election jumped a spot higher on the list of tail risks for the marketCovid-19 remains the top tail risks for the markets. The percentage of participants citing covid as the biggest risk increased from 30% in September to 34% in October
Global fund managers see US elections as the second biggest risk for the markets, showed the latest Bank of America (BofA) Securities survey. In October, the US election jumped a spot higher on the list of tail risks for the market. According to the survey, about 23% of those surveyed are worried about the US elections. This is higher than the 18% in September.
Of the total 224 panelists, 61% see contested outcome of the US elections causing maximum market volatility in the fourth quarter. Contested election is a scenario in which the validity of the result is challenged by the losing candidate.
"We increase our equity allocation following a meaningful improvement in fundamentals. However, heightened uncertainty ahead of the US election limits our upgrade to neutral. As such, a lot rests on the result of the US election and the outlook for additional fiscal stimulus. A decisive Democrat victory would be positive for the economy, but a divided Congress or a contested result could prolong the policy paralysis," analysts at Oxford Economics said in a report on 13 October.
Covid-19 remains the top tail risks for the markets. The percentage of participants citing covid as the biggest risk increased from 30% in September to 34% in October.
"Greater social mobility still generates a surge in infections. The scientific community has made great strides, but permanent layoffs are growing and the global economy has not achieved a self-reinforcing expansion. Despite massive monetary support, equity markets will struggle to move higher in the absence of a medical breakthrough," Bob Doll, senior portfolio strategist, Nuveen Asset Management, said in a note earlier this week.
Meanwhile, concerns around a technology bubble have receded, falling from 22% to 16% in October. However, Brexit is a new tail risk event that some global fund manager are cautious about.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!