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

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.

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

Tech
ES00,
-0.28%

NQ00,
-0.61%
is leading stock futures south, with Treasury yields
BX:TMUBMUSD10Y
steady. The Hang Seng
HK:HSI
rose nearly 1.5%. Some attributed that to a crackdown on quant fund trading. Natural-gas futures are up 9%, after Chesapeake Energy
CHK,
-1.37%
cut its production outlook.

The buzz

After the close, Nvidia
NVDA,
-4.35%
is expected to report a 400% surge in adjusted earnings per share and revenue could triple.

Palo Alto Networks
PANW,
-0.09%
is off 20% after a disappointing forecast, with similar losses from Teladoc
TDOC,
-2.57%
whose own outlook fell short. SolarEdge
SEDG,
-0.75%
is slumping on weak sales.

Amazon
AMZN,
-1.43%
will join the Dow Jones Industrial Average in a week, replacing Walgreens
WBA,
+1.50%.
Also, Amazon founder Jeff Bezos has sold more shares.

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.

A United Airlines
UAL,
+3.50%
flight cut its flight 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.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Random reads

Jet-setter — Enzo the Italian greyhound.

College student tracking Taylor Swift’s jets will not be deterred.

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