Wall Street braces for turmoil as US election looms

Wall Street braces for turmoil as US election looms

Democratic presidential challenger Joe Biden is seven factors forward in nationwide polls and beating the US president in most swing states. However, full outcomes are unlikely on election night time as a consequence of an anticipated surge in postal voting due to the pandemic.

“The fact that equities are paying close attention to the election is evident in the sharp kink in the VIX futures curve around the election,” mentioned Marion Laboure, a Deutsche Bank analyst. “Equities have historically gone sideways ahead of the election as investors buy protection in the option space against potential volatility around the election.”

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Critics of Trump worry he’ll use any outcomes delay or disputed votes to problem the election’s validity with the president final week refusing to decide to a peaceable transition of energy if he loses.

“The most unpleasant scenario for the markets in the US presidential election on November 3 would be an unclear outcome,” mentioned Bernd Weidensteiner, economist at Commerzbank.

The courtroom battle that adopted the 2000 election between Al Gore and George W Bush didn’t result in extreme volatility however this time “political chaos would hit markets”, he mentioned. Mr Weidensteiner added that the US greenback specifically would undergo.

Mr Trump’s victory in 2016 brought on temporary volatility in markets earlier than shares rallied strongly on hopes of tax cuts and deregulation. The S&P 500 has soared 56 per cent since he was elected however shares have come off document highs in current weeks. The resurgence of the pandemic in Europe and the US has dented confidence within the financial restoration.

“While equities tended to perform poorly ahead of past elections, they typically rebounded thereafter,” mentioned Emmanuel Cau of Barclays. “For now, high uncertainty is feeding the demand for safety.”

Telegraph, London

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