BNP Paribas Wealth Management: Biden Win (70 Percent)
BNP Paribas Wealth Management sees a Democratic sweep (40 percent) and Biden win with a split Congress (30 percent) as the most likely outcomes. But it warns that a 30 percent probability for a Trump reelection cannot be ignored.
«This is not a low probability in finance,» said Prashant Bhayani, Asia chief investment officer for BNP Paribas Wealth Management.
«Politics are inherently unpredictable, hence, the key is to separate politics from policy. An underrated element does the Congress remain split or unified which can lead to more policy change. Clearly, policy and how it affects the economic cycle is what matters for financial markets.»
Barbell Approach
Although a relief rally historically follows regardless of the outcome, the chance of a challenged outcome will lead to short-term volatility, according to Bhayani, though a confirmed Biden win would provide more relief in Asia due to his less confrontational approach.
The bank is currently advising clients to adopt a «barbell approach» by focusing on two areas. Firstly, maintain exposure on risk assets and buy on dips. Secondly, hedge with defensive assets like gold, dividend stocks and quality corporate bonds.
The election poses some selected policy risks and creates opportunity overall as volatility increases,» Bhayani said. «Don’t let the election paralyze your portfolio strategy. Embrace the opportunities that uncertainties create.»
