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Mobius sees US bear market if Democrats win House

Singapore

A DEMOCRATIC Party majority in the US House of Representatives could push US stocks into a bear market, and spur a re-allocation of funds to European, Japanese and developing nation equities, according to veteran emerging market investor Mark Mobius.

The S&P 500 Index, which has dropped around 9 per cent from a record close in September, could fall a further 10 to 15 per cent as a Democratic win would create policy gridlock, he said.

Current polling suggests that the Republican Party is likely to lose control of the House in the mid-term elections on Nov 6.

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"As the US markets go down, money will be in search of new opportunities," Mr Mobius, co-founder of Mobius Capital Partners LLP, said. "We're beginning to see that already."

That shift in fund flows from a Democratic win could help arrest declines in equities outside of the US that, until this month, have been lagging behind their American counterparts.

There's "a lot of value" in developing nation equities after the dramatic declines, Dr Mobius said. BLOOMBERG