Analysts: Markets should remain cautious amid uncertainty in US election

The main goal for investors during the US election should be to establish situational awareness and avoid overconfidence in the election outcome and market impact. Investors may benefit from adjusting their expectations. The analysis suggests that the market-implied probability of a Republican victory has increased, leading some to expect a clear result on election night. However, Morgan Stanley believes this scenario is possible but not the most likely one. Neither candidate appears to be the clear frontrunner to win the Electoral College, so a prolonged vote-counting scenario similar to 2020 is possible. Given the poor past performance of early voting data, Morgan Stanley does not place much weight on these data points and advises against over-interpreting short-term market movements. The company states that the market's short-term reaction to the election is often noisy and may not foreshadow medium-term trends.