Equity markets may get hit hard on Harris win: Morgan Stanley

The equity market may fall if Donald Trump wins the presidential elections, but Kamala Harris' victory may pose a stronger downside risk, said Mike Wilson, Morgan Stanley’s chief U.S. stock market strategist.

“While some argue a Trump win would be a headwind for growth and, therefore equity markets, due to tariff risks and slowing immigration, we think there’s an additional element from the 2016 experience that is worth considering — animal spirits,” he told Market Watch.

In 2016, there was the largest three-month positive impact on small-business sentiment after the Trump victory in at least 40 years, Wilson said.

He added that individual investor sentiment also rose. “We think it’s fair to say that markets may be trying to front run a repeat of this outcome as Trump’s win in 2016 came as a surprise to pundits and markets alike,” he said.

That could lead to Wall Street disappointment if Vice President Kamala Harris wins — which has a 50-50 chance of happening, polls show.

But Wilson pointed out the risk that markets could fall if Trump wins, too. “Certain areas of the market may be vulnerable to a sell the news phenomena if the upside is already priced amid heavy positioning,” he said.