The Democratic U.S. presidential candidate and former Vice President Biden spoke at the suspension of the campaign held in Win Springs, Georgia, U.S., on October 27, 2020.
Brian Snyder | Reuters
Some market participants believe that they have a better sense of who will win the presidential election, which actually brings another level of uncertainty to the stock market.
The national opinion poll showed that former Vice President Joe Biden was 7 points ahead of President Donald Trump, and this advantage lasted until October. At the same time, the prediction market gave Biden a 63% chance of winning, and this number has also been maintained this month.
The possibility of Biden̵
If Trump does lose, he will have no incentive to push up his spending plan during the duck-leg period. By January, this may plunge the economy and the market into an uncomfortable trough.
Biden’s victory may eventually lead to a larger stimulus package, but this is not enough to ease the current tension in the market.
Art Hogan, chief market strategist at National Holdings, said: “We just had the opportunity to withdraw Lucy from football. “It is clear that this is the market now. The door has been closed. At best, the duck may see something. [congressional session], But it was not until January that market prices began to rise. “
Normally, two months does not seem to be that long, but as Covid-19 cases are raging around the world and rising sharply in the United States, time has become the enemy of the market.
Many small businesses report that their cash supply is rapidly dwindling, and without any help from Washington, it is expected that there will be thousands of reductions in cash flow in the next six months. The January stimulus may help, but economists worry that if Congress continues to stall, it may cause economic scars.
Hogan said: “Now, you already have a nasty cauldron.”
To be sure, most Wall Street strategists agree that the disturbing trend of coronavirus cases is now the focus of the market rather than political influence. However, the two are in conflict: the more the virus spreads, the more restrictions on the economy.
This, in turn, exerted economic pressure and frightened investors, who sold stocks aggressively on Wednesday, leaving October’s main average index negative.
ClientFirst Strategy President Mitchell Goldberg said: “It is greatly affecting the thinking of investors. “If Trump loses the election, he will have no incentive to pass stimulus measures, and the next administration will appreciate it. If we don’t get stimulus before the next session, we may see a 5% to 10% correction in the market. Management is in. But I think this will be limited to this. “
However, there are many calculus on the market that require precise analysis.
On the one hand, Biden is still far from winning the election. According to data from RealClearPolitics, in the days before the 2016 election, Trump was still seriously behind Hillary Clinton, even though Biden and the former Secretary of State had a 5.2 percentage point difference in the previous election.
There is also a balance of power to consider in Congress.
Democrats can almost control the House of Representatives, but the 53-37 Republican balance in the Senate clearly played a role.
According to the RCP opinion poll, the opinion poll shows that at this time Republicans hold 46 seats, Democrats hold 45 seats, and the remaining 9 are balanced. Doing everything to lead the Democratic Party will keep the Democratic Party between 51-49, even though half of these races are within voting error.
“Even if there is an absolute winner in the presidency, what about the Senate campaign?” said Doug Roberts, managing director of Channel Capital Research. Investors “want some level of clarity. There is some uncertainty in the blue wave. What they really want is stimulus.”
Roberts added that one or two sprints of rising infection and stimulus uncertainty may lead to “although it may be a major correction, but it may be a small correction.” “It doesn’t necessarily mean that you will have a bear market, but you may have a fairly drastic correction and rebound a bit until you see what is happening.
Investment experts predict that once the stimulus measures are passed, the current decline will eventually bring new buying opportunities, although it may be difficult until then.
“Target Wealth Management” founder Michael Yoshikami said: “It’s more a combination of three things.” “This is uncertainty, not stimulation, but excessive optimism about Covid. If this None of the three things exist, and I don’t think you will see the downward trend you are seeing now.”