S&P 500 : Election adds more Volatility
(Mon, 2 Nov 2020). Election day will finally be here on November 3. Polls indicate former Vice President and Democratic nominee Joe Biden will take the White House. He is leading ahead of incumbent President Donald Trump by a little over his 7-point average that he’s maintained for several weeks. Mr. Biden is also outperforming Trump in many key swing states like Florida – but there’s a catch.
As of last week, early voting reached over 50% of total US ballots cast in 2016. This comes on the heels of record mail-in ballots amid the coronavirus pandemic, with most coming from Democrats. The risk here comes from investors getting a false sense of certainty in terms of Mr. Biden’s chances. Since Republicans are more likely to vote in-person, support for Trump may surge on election day, potentially throwing investors off balance.
Leading up to the election and following the results, S&P 500 volatility will likely spike as result of the high-impact nature of this election. The index has already been facing heightened selling pressure amid a spike in Covid-19 cases and a stalemate in Congress over fiscal stimulus. Combined, these factors may rattle financial markets and amplify the uncertainty of what is already a fundamentally-precarious environment.
BREXIT HEADACHE CONTINUES
Brexit is an absolute mess – but we are getting closer to the end of it. Policymakers will likely hold an emergency summit on November 15-16 to hammer out an agreement before the end of the transition period on December 31. Lawmakers continue to be divided over issues like fisheries and settling mechanisms, a point of content for both sides.
Increasing premonitions of a no-deal scenario, coupled with the surge in Covid-19 cases – and the strict lockdown measures that follow – could further deepen the UK’s economic contraction. Combined with the political shock of Brexit, these factors together make a strong case for British Pound volatility ahead. Oscillations may swing more to the downside giving the growing number of high-magnitude risks.
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