Here's how BCA Research recommends playing two possible US election outcomes

Investing.com - A victory for Donald Trump would move markets, but not as much as it did when he notched a surprise victory eight years ago, according to analysts at BCA Research.

Trump, the Republican Party candidate, and Democrat Kamala Harris were campaigning furiously across key battleground in the final day before the vote as they tried to secure any last-minute support. Both are locked in a virtual tie heading into Election Day, particularly in the crucial swing states that will likely heavily impact the outcome of the vote.

Traders will be closely monitoring the returns, with the winner's policies set to potentially have a major influence on everything from the oil and gas sector and Big Tech to electric vehicles and financial services.

In a note to clients on Tuesday, the BCA Research analysts flagged that volatility will potentially be "high" as markets react to the results.

But they argued that long-term investors should position for a so-called "Red Sweep," in which Trump wins and Republicans gain control of the US Congress. This result, they said, would lead to "structural changes for immigration, taxes, and tariffs."

The analysts recommended investors snap up equities over bonds, purchase small-cap shares and stock in materials companies, and buy the US dollar in the event of a Red Sweep.

They added that investors should "fade," or trade against, a potential sell-off in US Treasuries, saying Trump's proposed blanket income tariffs represent a "threat to global growth." Treasuries are seen as a safe-haven asset during times of economic upheaval.

Meanwhile, the analysts predict the next likeliest result would be what they deemed "Blue Gridlock." In this scenario, Harris wins, but Republicans control the Senate -- the upper chamber of the US Congress.

Investors should react to this outcome by buying bonds over equities, selling the dollar, and purchasing the Mexican peso and Eurozone equities, the analysts said. They added that investors should also stay "long duration" across developing market bonds and buy emerging market stocks.

Source: Investing.com