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Financial markets need to 'start thinking about a blue wave': strategist

As President Trump continues to sink in the polls, the likelihood of a Democratic sweep in November increases. And that's something financial markets need to be thinking about now.

“I would say the chances of a decisive Biden victory, with the blue wave, the Democrats taking the Senate and keeping the House, the chances are quite good today,” Greg Valliere, Chief U.S. Policy Strategist at AGF Investments, told Yahoo Finance.

The latest Reuters/Ipsos poll (taken July 15-21) found 46% of voters said they would support former Vice President Joe Biden in the election, while 38% would vote for Trump. Trump’s approval rating on handling the coronavirus crisis was modestly positive in late March, but has since fallen, with 58% disapproving and just 38% approving, according to Fivethirtyeight. Biden has an eight-point lead over Trump on average, and a double-digit lead in some polls. And Democrats are daring to dream of a big blue Biden tsunami.

But Valliere is quick to caution that Nov. 3 is far away and foresees Trump turning “ruthlessly negative” on Biden, particularly when it comes to China.

US Democratic presidential candidate Joe Biden speaks about on the third plank of his Build Back Better economic recovery plan for working families, on July 21, 2020, in New Castle, Delaware. (Photo by Brendan Smialowski / AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)
Democratic presidential candidate Joe Biden speaks about on the third plank of his Build Back Better economic recovery plan for working families, on July 21, 2020, in New Castle, Delaware. (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)

“I think he's got to show that he's tough, that he does have a plan. And I think he's going to demagogue Biden. I think this is the major theme the for next couple of months – nonstop demagoguery against Biden as someone who is tied to China, who has financial dealings with China, who is a wimp on China. So, I think he's going to tie this to Biden extensively, starting very soon. If you're trailing this much, what does he have to lose,” Valliere said.

Criticized for his handling of the pandemic, Trump is facing backlash on both sides of the aisle and another round of stimulus could give him a much needed bump in the polls. Valliere expects a bill in the next couple of days and said negotiations should begin next week.

As for Trump turning national sentiment in his favor?

“Maybe we'll get encouraging news on a virus. But I think for the financial markets, it's prudent to start thinking about a blue wave. I think that's quite likely,” Valliere said.

Yvette Killian is a producer for Yahoo Finance’s On The Move.

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