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

By Barbara Kollmeyer

Critical information for the U.S. trading day

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

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.

"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) (NQ00) 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.

   Key asset performance                                                Last       5d      1m     YTD     1y 
   S&P 500                                                              4,975.51   -0.92%  2.58%  4.31%   21.98% 
   Nasdaq Composite                                                     15,630.78  -1.96%  1.76%  4.13%   32.61% 
   10 year Treasury                                                     4.281      2.87    10.02  40.03   35.59 
   Gold                                                                 2,040.70   0.34%   0.87%  -1.50%  10.23% 
   Oil                                                                  77.23      0.38%   3.43%  8.27%   0.88% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

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

Palo Alto Networks (PANW) is off 20% after a disappointing forecast, with similar losses from Teladoc (TDOC) whose own outlook fell short. SolarEdge (SEDG) is 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.

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) 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.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   SMCI    Super Micro Computer 
   HOLO    MicroCloud Hologram 
   AMZN    Amazon 
   PANW    Palo Alto Networks 
   OCGN    Ocugen 
   NIO     Nio 
   AAPL    Apple 
   AMD     Advanced Micro Devices 

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-Barbara Kollmeyer

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