A contested election will likely translate to increased market volatility and downside risk for equities. The longer the election resolution process, the greater the volatility and downside risk. A potential capital gains tax increase could lead to selling before year-end.
SCOTUS justice Samuel Alito left the door open for President Trump initiated litigation with his November 6th order regarding the segregation of mail-in ballots in the state of PA. There is at least one signed affidavit pertaining to alleged voting fraud in PA. It remains to be seen what the outcome may be in PA and other states where President Trump’s legal team may file litigation this week.
As a proxy, one may look to the Bush/Gore general election of 2000 where it took 37 days to process a recount in the state of FL.
Should the Electoral College formally elect Joe Biden as President and should the GOP retain a Senate majority, a significantly smaller stimulus package is likely in January than the $3-4 Trillion sum we anticipated in a “blue wave” scenario. We do expect Biden to push through some tax increases, potentially including a higher capital gains tax. A looming capital gains tax hike – however likely – could lead to accelerated selling before year-end.