Don't expect a Hillary Clinton "relief rally" if she wins the presidency because the markets have considered her the favorite all along, said David Lafferty, chief market strategist at Natixis.
"Forget any fireworks because it's already been priced in," said Lafferty.
Lafferty said his latest estimate is for Clinton to rack up 330 to 340 electoral votes out of 538 total electors, versus a Donald Trump tally of 200 to 210. He said the Senate remains in play and is now tipping in favor of the Democrats as the Republican Trump starts to sink. In Lafferty's view the House is getting closer as Trump fades. Nevertheless, he sees a 30-seat pickup as being unlikely.
"The end result will most likely be a divided government, with the House thwarting much of Clinton's agenda," said Lafferty. Majority Leader, and Wisconsin Republican, Paul Ryan "will preside over a Republican civil war."
Election aside, Lafferty expects U.S. earnings growth to return in the fourth quarter and into 2017. However, he sees growth rates will be in the mid single digits, consistent with nominal global growth. With profit margins high in many markets, he believes "bottom-line earnings cannot outpace top-line revenue."
Stocks "offer attractive relative value with bond yields so low, but absolute value is not broadly compelling at current valuations," said Lafferty. "We expect equities to be rangebound, as they have been for the past year, until earnings growth can re-emerge."
Lafferty expects the Federal Reserve to raise interest rates by 25 basis points at its December meeting. A November hike just prior to the election remains unlikely, in his opinion.
Not that Lafferty is too enthused about bonds, even with a slight bump in yield. He said low-to-negative sovereign bond yields remain unattractive as they are predicated on artificial policy stimulus.
"Buying negative yielding bonds might be a great short term trade with the [European Central Bank] or [Bank of Japan] acting as the greater fool, but it's a terrible long-term investment," said Lafferty. "Like stocks, both high-yield and bank loans offer attractive relative value if not absolute value."