While many on Wall Street consider the November presidential elections to be the most “immediate threat” to the global economy, markets may be setting up for a fall even before that date.
That’s because most investors anticipate that Democratic presidential nominee Hillary Clinton will take the White House by a landslide, said Bank of America Merrill Lynch’s Head of Global Rates and Currencies Research, David Woo in an interview with CNBC Monday. As a result, investors, the professionals at least, have positioned their portfolios accordingly.
But that level of certainty from investors leading up to the November elections, a period that has been historically volatile for markets, is risky. According to Woo, there’s a “very good chance” that Clinton’s lead will narrow, triggering more volatility in September and October. And if that happens, bonds and stocks could drop.
(Read more, Here Are the Stocks to Buy if Donald Trump Becomes President)
“That is going to be a shock to the market,” he said. “We saw that on this past Friday—bonds sold off and stocks sold off. That’s the kind of situation that becomes self-fulfilling.”
Previously, a team of Citigroup analysts also warned that most investors expect a Clinton win. That means markets could be in for a deeper shock should Trump become commander-in-chief.