Investing guru Mark Mobius warns that markets will tumble if the outcome of the U.S. presidential election is contested.
“If that takes place, then we’re really in trouble. The markets will not like it,” the founding partner of Mobius Capital Partners told CNBC.
“You’ll see a real correction or maybe a dramatic fall in the market. So that’s a very, very big problem,” the veteran investor said.
How much markets would fall will depend on how long the dispute lasts, Mobius said.
As a result, Mobius said he’s invested in companies that are “somewhat immune to economic downturns,” which CNBC.com said means businesses with strong balance sheets and those that can maintain or increase demand for their products and services.
Mobius said a Trump win is more “favorable” to markets because the president has promised further tax cuts, while Democrats want to raise taxes on businesses and rich people.
“It’s really all about tax,” Mobius said. “As you know, Trump is promising another major tax cut. The Democrats have not said that, they plan to raise tax on the so-called rich people and on corporations. So, that is really the big, big issue going forward,” he added.
To be sure, fund managers overseeing $593 billion are bracing for extreme market turbulence as they expect the result of the November U.S. election to be contested even as the Democratic nominee Joe Biden holds a comfortable lead over President Donald Trump.
Among investors surveyed in the week through Oct. 8 by Bank of America Corp., 61% believe the U.S. vote’s outcome will be challenged, causing maximum volatility in the final months of the year, Bloomberg said.
BofA’s poll signals that investors remain on edge ahead of the Nov. 3 election and fear a delayed outcome as the Trump campaign continues to raise questions about the legitimacy of mail-in ballots. That stands in contrast to Wall Street strategists, who have been saying that there’s now less chance of a contested election.
Goldman Sachs Group Inc. economists have said that a combination of early results, voter turnout, county-level data and the high correlation of polling errors across states suggests investors will have enough information on election night to determine the likely victor.
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