Reuters

Political uncertainty remains a negative for markets going forward, according to a Monday note from Morgan Stanley.

A survey by Morgan Stanley conducted in October showed that as many as 78% of investors expect stocks to decline in the first three months if a Democrat wins the presidential election.

If Trump is reelected, only 16% of investors expect stocks would decline in the first three months of his second term.

Read more on Business Insider.

Amid the coronavirus outbreak that sent stocks to the fastest correction since the Great Depression, political uncertainty remains a potential negative catalyst for markets, according to Morgan Stanley.

As many as 78% of 645 investors surveyed by Morgan Stanley from October 8-22 expect equities to decline in the first three months if a Democrat is elected president in November, according to a Monday note. Only 10% of investors say that they expect stocks to remain unchanged if a Democrat wins the White House, while 12% expect markets to rally.

On the flip side, only 16% expect stocks to decline in the first three months if President Trump wins reelection in 2020. As many as 35% expect that stocks would remain unchanged, and a whopping 49% said they expect that stocks would rally in the first few months if Trump wins a second term.

Morgan Stanley Research

"The closer we move to November, the more we expect market participants to discount potential changes to tax and regulatory regimes that may come as a result of the US elections," Morgan Stanley equity strategist Michael Wilson wrote in a Monday note.

"At a minimum, we think the uncertainty associated with the election will act as a limiting factor on US business investment and the ability of the market multiples to expand, even in the absence of virus related concerns," Wilson said.

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