Here’s why Biden is going to pull off a win in November, say these strategists

The wait for Nvidia earnings is nearly over, but with the results not coming until after the closing bell, a jittery Wall Street seems set to stretch losses to three straight losing sessions. Fed minutes are also en route.

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Read: Nvidia sees its biggest market-cap loss ever as stock has worst day in 4 months

Apart from those burning topics, investors also can’t hide from the fact that a U.S. presidential election, which seems destined for a fiery rematch between President Joe Biden and former President Donald Trump, is mere months away. Already, note strategists at Societe Generale, currency markets are pricing in a big day of volatility for the euro/dollar the day after the U.S. election.

Our call of the day , from independent advisory firm Signum Global Advisors, is on the side of contrarians, saying Biden is going to win this, even if polls are favoring Trump, who has readied his shortlist for vice president.

“At this stage in the U.S. presidential race, more datapoints a priori seem to favor former President Donald Trump over current President Joe Biden. Adjusted for what we view as the determining factor in this election — voter mobilization — however, our current base case expectation is a Biden victory (65%), coupled with a divided Congress (Republican-majority Senate, Democrat-majority House),” says a team led by senior analyst Rob Casey in a Tuesday note to clients.

They acknowledge odds stacked against Biden, such as voter disapproval —39.7% for and 55.9% against — and cite data showing first-term presidents who can’t hit 50% approval during any time of the year before the election won’t win. And then there’s the age issue, with polls registering more concern over Biden’s 81 years on the planet than Trump’s 77 years.

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But Signum’s data points to two of three leading models that favor Biden over Trump, dependent on the economy staying on track, voter turnout and third-party votes sticking near historical norms. They expect Democratic turnout to be boosted by laws restricting abortion and concerns over preserving democracy. They add that issues where Biden trails Trump, like immigration, are “less visceral,” noting for instance with immigration that only 17% say it’s affected them directly.

More good news for Biden: “Since 1944, no incumbent president running for re-election has lost without a recession during or immediately preceding the election cycle,” said Casey and the team. Leading economic indicators on Tuesday showed signs of a slowdown are fading .

Incumbency is also on Biden’s side, say the analysts, who note that since 1980, 57% of sitting presidents seeking re-election have won, and from 1968 to 2016, the incumbent has gotten 52% of the vote.

Another favorable metric — polls are favoring Trump, but those have proven off by several points in 2004-2020 election cycles. Betting markets, favoring him 51.7% to 31.4%, were wrong at this stage in 2016 and 2020.

“Adjusted for these considerations, the election is arguably wide open at this stage (3 datapoints to each candidate), and our own assessment is a Biden win (at 65% odds), for the following reason: we expect Democrat-leaning voters to mobilize in greater numbers relative to Republican-leaning voters,” they say.

Also read: This is the mistake investors are making in thinking about a second Trump presidency, say UBS strategists

Read: Trump tax cut 2.0: Would slashing the corporate rate again boost stocks?

The markets

The Nasdaq COMP is leading the way south for Wall Street SPX DJIA as Nvidia earnings loom, with Treasury yields BX:TMUBMUSD10Y are steady. The Hang Seng HK:HSI rose nearly 1.5%. Some attributed that to a crackdown on quant fund trading . Natural-gas futures NGH24 are up 9%, after Chesapeake Energy CHK cut its production outlook.

The buzz

After the close, Nvidia NVDA is expected by analysts to report a 400% surge in adjusted earnings per share and revenue that could triple. Meanwhile, stocks owned by Nvidia saw a soar in bullish bets , days before the filing that sparked a huge rally.

Read: Three stocks of AI ‘enablers’ to consider as Nvidia sets up another possible surprise

Palo Alto Networks PANW is headed for its worst-ever session after a disappointing forecast , with Teladoc TDOC also tumbling after its own outlook fell short, and SolarEdge SEDG slumping on weak sales .

Amazon AMZN will join the Dow Jones Industrial Average in a week , replacing Walgreens WBA. Also, Amazon founder Jeff Bezos has sold more shares .

Reddit reportedly plans to offer shares in its IPO to 75,000 of its biggest users when it debuts next month.

The minutes of the Fed’s January meeting are due at 2 p.m., with several Fed speakers ahead of that — Atlanta Pres. Raphael Bostic at 8 a.m., Richmond Pres. Tom Barkin at 9:10 a.m. and Gov. Michelle Bowman at 1 p.m.

The Biden adminstration will cancel $1.2 billion in student-loan debt for 153,000 borrowers.

A United Airlines UAL flight had to cut its journey short after wing damage .

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The chart

Hedge funds pared their exposure to Magnificent Seven stocks during the last quarter of 2023, reports Goldman Sachs. Those funds were aggressive buyers in the first three quarters of last year — Amazon was the exception to year-end selling. They say former VIP Microsoft saw the biggest fall in ownership by those managers.

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Source: finance.yahoo.com