Election Delays and Surprises: Morgan Stanley Predicts Shifts in Market Paths

Morgan Stanley analysts Monica Guerra and Daniel Kohen examined the potential market impacts of the 2024 U.S. presidential election in a recent note

Morgan Stanley analysts have highlighted the potential for the 2024 U.S. presidential election to significantly impact financial markets, particularly due to delayed election results and economic uncertainty.

In a recent analysis, Monica Guerra and Daniel Kohen of Morgan Stanley examined the market implications of the upcoming election, considering factors such as mixed economic signals and heightened investor uncertainty.

They noted that while political outcomes and subsequent policy shifts can influence company profitability, the analysts ultimately believe that “the business and economic cycle are likely to be more relevant to market performance.”

The analysts advised investors to prioritize long-term strategies rather than reacting excessively to market movements driven by the election.

However, they also cautioned that the potential for delayed election results could lead to increased market volatility.

“Delayed election results introduce a period of uncertainty and speculation, which historically has resulted in elevated levels of short-term market volatility,” Guerra and Kohen explained.

With close polling expected in key swing states and varying timelines for mail-in ballot counts, the final results could take days or even weeks to be announced, potentially sparking significant market turbulence.

“We expect a contentious final sprint to Election Day as campaigning accelerates, proposals sharpen and competition increases for swing-state voters,” Guerra and Kohen added.

“An unexpected political event or revelation, known as an ‘October surprise,’ could marginally sway the election in either direction, and mail-in voting and staggered ballot counting, as well as the sheer tightness of the race, could leave the election result undetermined for some time and drive heightened market volatility.”

The analysts concluded by emphasizing the importance of investors maintaining their long-term objectives during such periods.

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