The likelihood of a Democratic party takeover of at least one house of the U.S. Congress in the midterm elections in November is prompting some portfolio managers to move more money to cash and rotate away from sectors like financials and technology that could see greater regulatory scrutiny.
Fund managers from Federated Investors, OppenheimerFunds, and BMO Global Asset Management are among those who are repositioning their portfolios and seeing cash as more attractive with the Nov. 6 elections less than 100 days away.
Chief among their concerns: a so-called Blue Wave of Democratic victories could end the Republican Party’s single-party control of the White House and Congress, leading to both more investigations into possible abuses by the Trump administration and more stock market volatility.
Such a move would also embolden Democratic presidential candidates to run on a platform in 2020 calling for universal health care, increasing the minimum wage, and repealing the Republican-led corporate tax cuts passed in December, all of which could slow economic growth, he said.
Orlando expects that the U.S. stock market will tumble at least 10 percent between late August and September as the broad market starts to price in Democratic gains in Washington, he said.
Real Clear Politics, a polling aggregation site, has Democrats leading by 7 percentage points on a generic ballot, but rates the chance of a Democratic takeover of the House as a toss-up.
Democrats would need to retake 23 seats to gain a majority in the House, and 2 seats to control the Senate.
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