Contested U.S. vote could trigger volatility in markets: BofA survey

Hawks arena in Atlanta set to be the nation's largest polling place amid COVID fears

LONDON (Reuters) – Nearly three quarters of investors surveyed by Bank of America (BofA) expect a surge in financial market volatility in the fourth quarter, given the likelihood of contested U.S. election results, bringing the bear-to-bull summer rally to a halt.

Doubts over whether President Donald Trump would agree to hand over the White House if he loses have grown in recent weeks. Polls show him losing more ground to Democrat Joe Biden as the contenders push toward the Nov. 3 election.

The 224 fund managers with $632 billion assets under management surveyed by BofA last week saw the U.S. vote as the second biggest “tail risk” for markets. COVID-19 remained the top worry, the U.S. investment bank said in a note on Tuesday.

Despite pushing back expectations for a vaccine by a month to February, investors downplayed recession fears, with 60% saying the global economy was in an early-cycle phase.

Technology stocks, the backbone of this year’s blistering share rally, featured as the “most crowded” trade for the sixth straight month of the survey. Still, 50% of the survey participants said the sector was likely to continue leading equities in 2021, while 43% said that was unlikely.

(Reporting by Thyagaraju Adinarayan; Editing by Andrew Cawthorne)

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