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The world’s top asset manager BlackRock Inc. downgraded European equities to neutral on Monday on a surge in COVID-19 cases and renewed restrictions, but raised exposure to emerging stocks on a rising probability of a Democratic blowout in the U.S. vote.

“Polls are suggesting a greater likelihood of a Democratic sweep in this week’s U.S. election,” Mike Pule, global chief investment strategist at the BlackRock Investment Institute, said in a note to clients. “We are starting to incorporate themes we believe would outperform in that event, moving toward a more pro-risk stance overall despite last week’s market pullback.”

BlackRock upgrades emerging market equities to overweight, citing the rising probability of Democratic sweep outcome with larger fiscal spending, more stable foreign policy, a weaker U.S. dollar and negative real rates poised to benefit developing market assets.

The asset manager also upgraded Asia fixed income to overweight, saying China and other Asian countries had done better in containing the virus and are further ahead on economic recovery. However, BlackRock downgraded Japan equities to underweight, adding that a weaker U.S. dollar and stronger yen could weigh on the country’s exporters.

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