“Investor sentiment could take a turn for the worse over the very short-term, especially if there is uncertainty over the winner of the presidential election or if it takes longer-than-expected to declare a winner,” said Carol Schleif at BMO Family Office. “Sooner or later, the election result will be finalized, and any volatility from this is an opportunity in our view.”

Commodity trading advisers, or CTAs, are expected to sell US and global stocks no matter which direction the market goes, according to the Goldman Sachs Group Inc. trading desk.

“Our models assume that over the week CTAs are going to be material sellers in any market scenario,” it said.

JPMorgan Chase & Co. strategist Dubravko Lakos-Bujas expects US equities will climb into the final stretch of 2024 once the results of the US presidential election are declared, particularly if the outcome is political gridlock.

“Under either gridlock scenario, we think equities reprice higher as we clear the uncertainty, volatility decreases and hedges unwind, with investors refocusing on the Federal Reserve at a time when the economy and corporate earnings remain resilient,” he wrote.

The S&P 500 can keep climbing into the final stretch of 2024 as investors exhale after the US presidential election passes and year-end FOMO kicks in, according to Morgan Stanley’s Mike Wilson.

But with no clear catalysts in sight, that enthusiasm is likely to fade as the calendar turns to 2025, the strategist warns.

“I think we could see 6,000, potentially, in some sort of a clearing event, where there’s not a lot of consternation and people feel good about things,” Morgan’s chief US equity strategist said Monday in an interview with Bloomberg Television. The gauge closed at 5,712.69 Monday.

The sustainability of any upward move in equities if Trump wins the election is likely to depend on the magnitude of bond yields’ response, according to JPMorgan strategists led by Mislav Matejka.

A Trump win and a positive market reaction are widely expected at this point, and investors are already long equities “which could lead to travel and arrive at some point,” they said. If Harris wins, the uncertainty over the path of corporate taxes would increase near term. Over the medium term, equities might see some support from the reduced tariffs risk, the strategists noted.

While volatility has been elevated, it’s pointing to about a 1.7% move for the S&P 500 the day after the election — not an outrageous swing. The implied move has fallen steadily from a peak of around 2% in early October to be about in line with the long-term average for past elections, according to Stefano Pascale, head of US equity-derivatives strategy at Barclays Plc.

Beyond the general indexes, some sectors, such as crypto and clean-energy stocks, are seeing a surge in volatility well above their medians. Crypto stocks are pricing almost 10% moves, Morgan Stanley’s trading desk said last week, and those for renewable firms around 6%. That’s playing out in positioning, where, for example, more than 20,000 November call spreads were bought last week in Sunrun Inc.

To Dan Wantrobski at Janney Montgomery Scott, US equities remain largely in consolidation mode ahead of this potentially historic week. Investors should expect “more choppy trading in sessions ahead, he noted.

“Depending on how things develop, the markets themselves are teed up for either new highs (the primary trend is still bullish) or bigger drawdowns (overbought conditions remain, with some recent support levels broken),” Wantrobski said.

The year-to-date gains through October are the strongest for any election year going back to at least the 1950s, according to Keith Lerner at Truist Advisory Services Inc. These gains are supported by an economy that remains resilient and forward earnings that reached yet another record high, he said.

“Two pillars of this market also remain intact: 1) Don’t fight the trend, and 2) Don’t fight the Fed,” Lerner noted.

US equity markets performed relatively well during the past month in comparison to steeper declines during the period just ahead of past presidential races. That suggests optimism about the economy and further Fed rate cuts is outweighing worry about the US election, according to strategists at Citigroup Inc.

“Of course, the US election will play a prominent role in moving financial markets around this week,” said Anthony Saglimbene at Ameriprise. “However, a Federal Reserve policy decision on Wednesday, some light economic releases throughout the week, and roughly 20% of the S&P 500 scheduled to report third quarter results should also have their fair share of sway on directing stock traffic.”

With both US presidential candidates at a “dead heat” heading into the election, markets are bracing for a result that could lead to a wide range of policy outcomes. Yet, it is notable that, since 1933, equities have almost always risen by double-digits by the end of a president’s term, regardless of their party affiliation according to Seema Shah at Principal Asset Management.

“Investors should take caution. Those who allow their political opinions to cloud their investing decisions could miss out on the potential rewards that come with staying invested in the market over the long-term,” she noted.

Against the uncertain electoral backdrop, it might make sense to look at areas that have bipartisan support rather than industries that benefit from one party or the other, according to Scott Helfstein at Global X.

“For example, themes tied to U.S. competitiveness like infrastructure, defense technology, and nuclear energy are central to both party platforms,” he said. “Private investment in areas like AI, data centers, and robotics is likely to remain elevated as US companies look to sustain high margins in an environment with either higher tariffs or taxes.”

Financial markets are starting their final sprint into year-end and conditions are aligning for the normal seasonal rally, though one is far from assured, according to Jason Draho at UBS Global Wealth Management.

“The election should be a risk-clearing event, while economic fundamentals, policy, and investor positioning lean in favor of markets grinding higher,” he said. “For equities, this could also mean a further broadening out of performance that began earlier in the fall. Even if such a year-end rally doesn’t materialize, these conditions, along with the AI theme, give us confidence that the markets will move higher over the next year.”

Corporate Highlights:

• Shares of nursing home operator PACS Group Inc. tumbled after Hindenburg Research released a short report alleging that the company has been — among other things — “systematically scamming taxpayers.”

• Franklin Resources Inc. sank on news that the Commodity Futures Trading Commission is investigating trades at Western Asset Management Co., and that $18 billion of long-term cash had flowed out of that unit last month.

• Obesity pill data released by Viking Therapeutics Inc. and AstraZeneca Plc at a big conference foreshadowed an increasingly competitive landscape for weight-loss therapies, sending down shares of drugmakers in the field.

• Peloton Interactive Inc. picked up rare buy rating Monday as Bank of America Corp. upgraded the fitness company by two notches, touting its profit outlook and a positive view of its new chief executive.

• French grocer Carrefour SA is in the early stages of studying ways to boost its valuation, more than three years after talks to sell itself to an industry rival fell apart, people with knowledge of the matter said.

• Commerzbank AG Chief Executive Officer Bettina Orlopp is seeking to unlock more capital to pay out or invest, as she makes the case for an independent bank in the face of a potential takeover by rival UniCredit SpA.

Key events this week:

• China Caixin Services PMI, Tuesday

• US ISM services, Tuesday

• US presidential election, Tuesday

• Eurozone HCOB Services PMI, PPI, Wednesday

• China trade, forex reserves, Thursday

• UK BOE rate decision, Thursday

• US Fed rate decision, Thursday

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3% as of 4 p.m. New York time

• The Nasdaq 100 fell 0.3%

• The Dow Jones Industrial Average fell 0.6%

• The MSCI World Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.4% to $1.0875

• The British pound rose 0.2% to $1.2953

• The Japanese yen rose 0.6% to 152.15 per dollar

Cryptocurrencies

• Bitcoin fell 2.6% to $67,317.27

• Ether fell 1.9% to $2,422.05

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.29%

• Germany’s 10-year yield declined one basis point to 2.39%

• Britain’s 10-year yield advanced one basis point to 4.46%

Commodities

• West Texas Intermediate crude rose 3.2% to $71.70 a barrel

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

(Corrects time reference to US election in 27h paragraph)

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