Morgan Stanley: Markets should remain cautious in the uncertain environment of the US election

Michael D Zezas, strategist at Morgan Stanley, said investors' main goal during the US election should be to build situational awareness and avoid overconfidence in the outcome and market impact. Investors could benefit from adjusting their expectations. He said the increased probability of a Republican victory implied by the forecast market had led some to expect a clear result on election night. Morgan Stanley believes this could happen, but it is not the most likely scenario. Neither candidate appears to be the clear favourite to win the Electoral College, so a repeat of the long vote count in 2020 could be possible. Morgan Stanley does not take early voting data too seriously given their poor track record and advises against reading too much into short-term market movements. It says short-term market reactions to elections tend to be noisy and may not signal medium-term trends.