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BlackRock’s Boivin Says Disputed US Election Is Underpriced Risk

By Naomi Tajitsu
Tesla's shares in premarket trade soared Thursday morning after the EV maker reported its biggest quarterly profit in more than a year and issued upbeat forecasts for 2025. CEO Elon Musk added $80 billion to the company's market value after strong quarterly earnings driven by Cybertruck sales. Also in the transportation sector, Boeing factory workers rejected a new labor contract that would have increased their wages by 35% over four years. In markets, New this Thursday morning, traders are favoring a half-point ECB rate cut in December. Money markets boosted the chance of that outcome to more than 50% for the first time on Thursday, after poor French manufacturing and services data added to the drumbeat for more aggressive easing to tackle Europe’s slowing economy. Today's guests: Laura Cooper, Nuveen; Jean Bolvin, Blackrock Investment Institute; Viki Farmaki, State Street Global Advisors

(Bloomberg) -- Markets are underpricing the risk that one of the US presidential candidates contests the results of next month’s election, according to the BlackRock Investment Institute’s Jean Boivin.

Boivin, managing director at the research arm of BlackRock Inc., the world’s largest asset manager, sees a disputed victory leading to “weeks of very disrupting legal battles” that could roil assets. Treasuries are already reeling from a selloff that’s pushed up benchmark yields more than 40 basis points this month, while stocks remain near a record high.

Trying to trade the US election is a “fool’s errand” and “the main thing to watch is really more the contested election scenario,” Boivin said in an interview with Bloomberg TV. “I don’t think that’s in the price and that’s where if you want to prepare for some scenario where you need to react, I think that’s one of those scenarios that could be bad for markets.”

With the race seemingly locked in a dead heat, its increasingly likely that both voters and investors have to wait beyond election night for the result — particularly if either candidate opts to challenge the count in one of the key swing states. 

Betting markets have increasingly favored a Trump win in recent days. The growing prospect of that outcome has boosted a gauge of the US currency to a three-month high and put it on track for its best month since 2022. Standard Chartered calculates that roughly 60% of that move can be attributed to Trump’s prospects.

At the same time, the rise in US Treasury yields has in part been driven by the possibility of high tariffs under a Trump presidency, which could add to inflationary pressures.

--With assistance from Tom Mackenzie.

©2024 Bloomberg L.P.