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JPMorgan lays out the nightmare election scenario that could send markets into a tailspin


Michael Cembalest, chairman of market and funding technique at JPMorgan Asset Management, warned in a report Wednesday of the “remote risk of an American horror story” and “constitutional mayhem.”

“Bottom line: a LOT of very unorthodox things have to happen for Trump to be reelected,” the JPMorgan strategist wrote. “Even so, I’m not ruling anything out.”

Post-election chaos would in fact rattle markets, which famously hate uncertainty. The smoother-than-feared election set off a celebration on Wall Street, with the S&P 500 notching its biggest post-election rally since 1932.

But if buyers do not know who’s going to be answerable for the world’s largest economic system, they may simply promote first and ask questions later.

“Markets might react negatively if the US as the world’s reserve currency nation is seen as sliding down a path toward electoral illegitimacy due to post-election maneuvers by political parties,” Cembalest wrote.

‘Dueling inaugurations’

To ensure, authorized specialists say Trump’s long-shot bid at overturning the election is simply that, a long-shot. Put merely, Trump is dropping by too many votes in too many states.

As Cembalest notes, Trump would wish to “reverse or impede results in three states” to stop Joe Biden from reaching the 270 electoral votes required by the Constitution. And as CNN has reported, regardless of Trump’s baseless claims (which Twitter has repeatedly flagged), there may be no evidence of the widespread fraud required to overturn these outcomes.
“Relax. Biden will be sworn in on January 20,” Ohio State constitutional election legislation professional Edward Foley wrote in a Washington Post op-ed final week, which was cited by Cembalest.

Even so, the JPMorgan strategist laid out a number of developments that might solid doubt on that end result, together with that a number of states submit competing slates of electors. Those competing slates would then be resolved January 6 by the brand new Congress by means of guidelines spelled out within the Electoral Count Act of 1887.

“The nightmare scenario for markets,” in accordance with Cembalest, could be if Senate Republicans declare the ECA unconstitutional, flip three states in Trump’s favor to provide him the required 270 electoral votes and Democrats refuse to take part.

“All of which sets up the prospect of dueling inaugurations,” Cembalest wrote, noting that this end result was only “narrowly averted” in 1876.

Another danger laid out by Cembalest is that if Barr directs investigators to “seize or impound election records” to probe for voter fraud, slowing down the method.

Dimon: ‘We have a brand new president’

For probably the most half, buyers have appeared to disregard Trump’s conflict on the election outcomes.

Markets haven’t flinched in response to headlines about his marketing campaign’s many lawsuits. If something, Wall Street got here to phrases with the result of the election even earlier than CNN and different media shops projected Biden to be the winner.

Investors have largely centered on different issues, together with the make-up of the US Senate, progress within the quest to develop a coronavirus vaccine to combat the worsening pandemic and the prospects for the financial restoration.

A messy Trump-Biden transition will derail desperately needed stimulus

But some are starting to lift issues a few switch of energy.

“I think we’re making far too little of this,” CNBC anchor Jim Cramer stated Wednesday whereas expressing worries a few peaceable transition to a brand new administration.

Liz Ann Sonders, chief funding strategist at Charles Schwab, stated that though her agency’s specialists do not see a lot of a danger of “rogue” electors, there “could certainly still be some black swan political event.”

Perhaps heeding the warnings of Cembalest, JPMorgan CEO Jamie Dimon has repeatedly urged Americans to respect the outcome of the election.
“We need a peaceful transition. We had an election. We have a new president,” Dimon said Wednesday throughout The New York Time’s digital DealBook convention. “You should support that whether you like it or not, because it’s based on a system of faith and trust.”

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