In the week before the USA presidential election last week, the three major USA stock indexes collectively fell, but some Wall Street institutions hold an optimistic outlook on a rebound in the USA stocks after the election. For example, Morgan Stanley's Chief USA Stock Strategist Mike Wilson expects the USA large cap to rise by over 6% by the end of this year.

Wilson believes that with the ending of the USA presidential election and concerns about missing out on year-end opportunities, the FOMO mentality may kick in. The S&P 500 index may continue to rise in the final stage of 2024, and it is not impossible for it to rise another 5% on the current basis. However, he also warns that due to the lack of clear catalysts, this enthusiasm for the stock market's rise may fade as 2025 approaches.

Wilson said in an interview with Bloomberg Television on Monday, November 4th, Eastern Time.

"I think that in the event of a certain clearing event, there will not be too much panic. People are optimistic about the situation, and we may see the S&P 500 rise to 6000 points."

Wilson went on to say that the S&P 500 index could rise to a maximum of 6100 points, but this year "under any circumstances" will not surpass this level because valuations are too high, and the P/E ratio is unlikely to expand further after entering 2025.

At 6100 points, it means that the S&P 500 index will rise by nearly 6.5% from last Friday's closing level, and about 4% higher than the closing high set by the S&P on October 18th.

Polls released last Sunday by ABC, NBC, New York Times, and others show that overall, Harris and Trump are evenly matched, with Harris slightly ahead of Trump in most swing states. Currently, Wall Street generally expects that after clearing obstacles from this Tuesday's U.S. presidential election and Thursday's Federal Reserve interest rate decision, U.S. stocks will be able to resume their upward trend.

Wilson also predicts that there may be some form of rebound after the election. However, his view is that the most favorable election result for the U.S. stocks is not Trump being elected president and the Republican Party sweeping both houses of Congress in a blue sweep, as the market prefers uncertainty. He said:

"Regardless of who is elected, we must undergo some form of fiscal consolidation. This will bring uncertainty once again."

"I do not believe that a Republican landslide is the most beneficial outcome for the stock market. I think (the best outcome) may be Trump's election while Congress is divided. The market likes uncertainty. They do not like one party in power."

Morgan Stanley strategist Dubravko Lakos-Bujas also expects that once the results of the U.S. presidential election are announced, the U.S. stock market will climb in the final stages of 2024, especially in the case of a political deadlock in the election results. His report on Monday stated:

"In any deadlock, we believe that as uncertainty diminishes, volatility decreases, and hedges are unwound, the stock market will reprice, with investors refocusing on the Fed as the economy and corporate profits remain resilient."

Wall Street News earlier mentioned that Morgan Stanley's team led by Wilson believes that if Trump wins the election and there is a blue sweep, the U.S. 10-year treasury notes yield is expected to show limited fluctuations due to improved economic growth expectations, which will be a positive signal for the stock market. In this scenario, cyclical stocks such as financial and industrial stocks will perform well.

At the same time, Morgan Stanley warns that if U.S. bond yields rise sharply due to market concerns over fiscal prospects, the stock market may see a rise in risk aversion, impacting tariff-sensitive consumer stocks.

If Harris is elected president and Congress is divided, meaning the Democratic Party fails to win majority seats in both the Senate and the House, only becoming the majority in one, tariff-sensitive consumer stocks and wind power stocks may outperform the large cap in the short term. In this scenario, a decline in interest rates may also benefit housing-sensitive consumer stocks, while financials, industrials, and commodity-sensitive industries may underperform.

Editor/ping