JPMorgan says 'market expectations are set up for a Biden win and a front-loaded fiscal package'

Published Mon, Oct 19 20208:38 AM EDTUpdated Mon, Oct 19 20209:39 AM EDT

(This story is for CNBC Pro subscribers only.) With Election Day only two weeks away, the base case for Wall Street has become a Joe Biden presidency and a consequent sizable fiscal deal, according to JPMorgan, which believes any other outcome would now disappoint the markets. Due to this year's already big early voting turnout, market expectations for a contested election have been dropping, leading Wall Street to increasingly price in a blue wave scenario in November, the bank said in a note to clients wrapping up the takeaways from its investor conference last week. "Market expectations are set up for a Biden win and a front-loaded fiscal package into 2021, and there is room for disappointment if these assumptions do not come to fruition," Joyce Chang, chair of global research at JPMorgan, said in a note on Sunday. "Fears of an electoral process that could last weeks are abating as over 26 million voters have already cast their ballots as of October 17 according to the U.S. Elections Project, which represents nearly 19% of the total votes counted in the 2016 general election," Chang added. Early voting has far outpaced the level during the 2016 election as the coronavirus pandemic has created an unprecedented demand for safer alternatives to casting ballots. That leads many to believe Biden's sizable lead over President Donald Trump in the national polls should be reliable. The NBC News national polling average has Biden up 9.5 percentage points over Trump, 51.4%-41.9%. "Polling data reflect the most stable election in modern history as Biden has held a consistent lead over Trump in polls that pre-date winning the Democratic nomination, which is a stark contrast to the 2016 election," Chang said. If the Senate remains Republican, markets would be concerned that the approval of a sizable fiscal package will face challenges, JPMorgan said. A split Congress under a Biden victory is now seen as the worst outcome by many for the S & P 500, the bank noted. Negotiations over the next coronavirus stimulus package have been deadlocked for months in Washington. Democrats, who have passed a $2.2 trillion relief bill in the House, have dismissed the Trump administration's latest $1.8 trillion proposal as insufficient. House Speaker Nancy Pelosi on Sunday called on the Trump administration to reconcile remaining disputes on the deal within 48 hours. Still, hopes for an agreement before the election have waned in recent weeks.

U.S. Democratic presidential candidate Joe Biden delivers remarks on health care at the Beech Woods Recreation Center in Southfield, Michigan, October 16, 2020.

Tom Brenner | Reuters

(This story is for CNBC Pro subscribers only.)

With Election Day only two weeks away, the base case for Wall Street has become a Joe Biden presidency and a consequent sizable fiscal deal, according to JPMorgan, which believes any other outcome would now disappoint the markets.