- Trump, Coronavirus and Markets
- Why should investors not be worried about the US election?
Trump, Coronavirus and Markets
Donald Trump has tested positive for Covid-19. What does it mean for the markets?
The US President has fallen victim to the coronavirus just as the election race is gaining pace.
Dow Jones futures fell more than 500 points after the news came out, while the safe-haven yen made its biggest jump in over a month.
In the upcoming days, we will see how serious Trump’s condition is and whether it poses risks for his campaign.
The USD will definitely become more volatile and the market will likely stay in the risk-off mode.
As for the longer term, Trump’s victory is considered more positive for the USD, as it would mean lower taxes and less regulation.
However, if Biden occupies the Oval Office, fiscal stimulus should finally come through.
So, can it be a win-win scenario for the greenback?
Less than 30 days separate us from the most exciting election in the world that everyone awaits: the US presidential election on November 3, 2020.
Let’s find out will Trump’s infection with Coronavirus save or eliminate his political life?
And why should investors NOT be concerned about these elections?!
Will Trump’s infection with Coronavirus affect his chances of re-election?
President Donald Trump’s positive COVID-19 test may be the straw that will break the camel’s back, or it may be his golden ticket to stay at the White House if he plays his cards intelligently.
1. What will happen to the election campaign?
Once confirmed that Trump caught coronavirus, all campaign conferences in the weeks leading up to the election were canceled.
That could make him lose a lot of sympathies because he always downplayed the consequences of this pandemic.
Trump had already been behind in opinion polls and surveys, partly due to his mishandling of the virus that has disrupted the daily lives of voters for more than six months.
2. To what extent are voters affected by his illness?
Given that Trump has repeatedly underestimated the risks of the coronavirus, showed his hostility towards wearing masks, mocked his rival, “Sleepy Joe Biden” for wearing one, and his insistence on reopening the economy at all costs – his illness may affect voters’ confidence in his ability to control this virus.
He would lose many unbiased and undecided voters if his case worsened.
3. How severe is Trump’s case and the health risks he faces?
Because of Trump’s age (74) and being overweight, he is in two very high-risk groups for developing severe COVID-19 disease and is more at risk of dying if he develops bad pneumonia.
The appearance of mild symptoms immediately after the infection is not a good indicator, and it indicates the severity of the disease and its fast spread.
4. What if his condition worsens?
If Trump is hospitalized or incapacitated, he could temporarily transfer power to his Vice President Mike Pence to get it back when his health improves.
If the US president dies in office, the vice president is sworn in as president.
Why should investors not be worried about the US election?
Investors overestimate the risks of the US presidential election, especially if it becomes a contested election that drags out for months, according to JPMorgan.
Market players love clarity and political stability and fear the unknown.
That is why these elections worry them because there is too much uncertainty.
JP Morgan believes that the market’s response to the US elections depends less on who is the winner and more on the clarity of the outcome.
Here are three reasons that will calm investors over market risks related to the US election, according to the JPMorgan:
1. An extended period of election uncertainty is very unlikely.
The surge in mail-in ballots may delay the announcement of results immediately because the process of collecting, validating, and counting votes may take two to three weeks after Election Day.
Some outcomes may be challenged in state courts or escalated to the Supreme Court.
However, the process will move quickly.
The possibility of the losing party refuses to accept the outcome is seen to be extremely low.
The result will be likely known in a matter of days/ weeks rather than months.
2. The conclusion of the election could be value positive either way.
Regardless of who wins the elections, the value of shares may increase for several reasons:
- An election result will remove risks from the market.
- The fiscal stimulus plan with any of the winners will come into effect quickly.
- The priority of both Trump and Biden will be to reopen the economy as fast as possible and in a safe way, in the hope that the potential winter wave of coronavirus infections will be controlled.
In the end, what do you think: will Trump be able to keep his position in the White House, or will Biden pull the carpet from under him?