Wall Street increasingly expects a "Blue Wave" in next month's election

Jason Draho, a strategist at UBS, told clients last week that markets were starting to price in a "Blue Wave outcome." That consensus, which has hardened over the last month, is emerging despite a recognition on Wall Street that the political polls showing Biden well ahead of President Donald Trump could be misleading — just as the polls largely failed to predict Mr. Trump's victory four years ago. And earlier this week, Morgan Stanley's top U.S. stock strategist, Mike Wilson, said in a podcast published on the financial firm's website that investors now expect a "blue sweep." Prediction markets, where people wager on who'll prevail on Election Day, also foresee a win for Democrats. The likelihood that Democrats will gain control of both the House and Senate is 60%, according to the market.Although stock market strategists are generally cautious in forecasting how a change in presidential administrations could affect financial markets, a number of Wall Street analysts have recently sought to reassure investors about the potential impact of a Biden win and a clean sweep for Democrats.