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Wall St Week Ahead-Trump-Biden debate could spark stock volatility

 (Added Friday updates for S&P 500)
    By Noel Randewich
    Sept 27 (Reuters) - Some U.S. stocks could face more
volatility next week as President Donald Trump and rival Joe
Biden face off in their first debate ahead of a November
election that betting services currently view as almost a coin
flip.
    A strong performance in Tuesday's debate by Biden, who
currently has a modest lead in betting odds and polls, might
boost stocks related to global trade and renewable energy, while
a perceived debate victory by Trump could benefit fossil fuel
and defense companies.
   The first of three scheduled debates comes at a fraught
moment on Wall Street.
    The S&P 500 tumbled around 10% from record highs in recent
weeks before paring some of those losses on Friday, as investors
worry about a prolonged recovery from the coronavirus and
uncertainty related to the Nov. 3 presidential vote, including
the possibility of a delay in announcing a winner. 
    If one candidate emerges stronger on Tuesday, "the debate
could be an individual stock and sector play," said Jack Ablin,
Chief Investment Officer at Cresset Wealth Advisors.
    "For example, I think life under Biden would be a lot
simpler for Apple than life under Trump," Ablin said, referring
to Trump's trade conflict with China. 
    Individual stocks and other assets have been susceptible to
market moves as a result of debates, even as broader markets
have generally shrugged them off. 
    The Sept. 26, 2016 debate between Trump and Hillary Clinton,
for example, sparked a 2% surge in the Mexican peso, as
well as moves in oil, gold and Treasuries, according to a
University of Michigan and Dartmouth College study.
    Many investors view Biden as more likely to raise taxes, and
see a second term for Trump, who favors deregulation, as better
for the overall stock market. At the same time, a Trump win
could spark concerns over ramped up tensions between Washington
and Beijing.

 Stocks to watch following presidential debates
 
 Potential winners from a strong Biden performance:
 COMPANY                          INDUSTRY
 Tyler Technologies               Government Technology
 HMS Holdings                     Healthcare Innovation
 Molina Healthcare                Medicare/Medicaid
 Brookfield Renewable Partners    Clean Energy
                                  
 AECOM                            Infrastructure
 Kansas City Southern             Global Trade
                             Source: Global Policy Index
 
 Stocks to watch following presidential debates
 
 Potential winners from a strong Trump performance:
 COMPANY                          INDUSTRY
 Occidental Petroleum             US Energy
 Enterprise Products Partners     US Energy
                                  
 Raytheon                         Defense
 Lockheed Martin                  Defense
 Turning Point Brands             Tobacco
 Enova International              Financial Deregulation
                             Source: Global Policy Index
    
    With expectations of a delayed vote count, the options
market shows investors are bracing for volatility in November
and December. Trump declined on Wednesday to commit to a
peaceful transfer of power if he loses, and said he expected the
election battle to end up before the Supreme Court.
    Adding to political uncertainty, betting websites are
offering odds giving Biden a 53% chance of beating Trump, down
from as much as 61% in early August, according to
RealClearPolitics.
    A Biden win could boost the S&P 500 by about 1% the
following day, while a Trump re-election would push the index
down about 4%, according to an analysis by Cornerstone Macro
based on a statistical comparison of recent asset prices and
election betting odds.
    "A possible interpretation of this result is that markets
have increasingly priced in a Biden win and view the alternative
as posing some risks, possibly stemming from potential
escalating trade tensions or similar factors," Cornerstone Marco
wrote.
    Gullane Capital Partners LLC, a hedge fund in Memphis,
Tennessee, is focusing on each presidential candidate's likely
effect on specific stocks it owns, rather than what each
candidate might mean for Wall Street as a whole, said Managing
Partner Trip Miller.
    "Biden is good for some of our businesses, like solar, and
Trump is better for some of our other businesses that benefit
from lighter regulation," Miller said.
     UBS in a report this week predicted that a second term for
Trump would have little effect on healthcare. On the other hand,
a Biden victory would lead to only modest changes, rather than a
major overhaul of health insurance, even if Democrats took
control of the Senate. 
    "We believe that the rhetoric on changes to healthcare
policy exceeds the reality of what can be accomplished," UBS
analysts wrote.

 (Reporting by Noel Randewich; Editing by Ira Iosebashvili and
Sam Holmes)
  
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