A long-running dispute over the outcome would be a nightmare for investors, who distrust celebrity. And what is more uncertain than a contested election that raises questions about the peaceful transfer of power in the world’s largest economy?
“There’s a creeping concern,” David Kotok, co-founder and chief investor of Cumberland Advisors, told CNN Business. “If it seems too close, we’ll get a market correction because we’re getting closer to the election.
The situation is further muddled by the pandemic, which has led many states – including major field battles – to emails to ensure that Americans who do not want to be exposed to coronavirus have a way to count their votes.
“Could several state outcomes that are highly dependent on e-mail polls – and have razor-thin results – prompt Trump to ask for fraud?” Greg Valliere, chief US policy strategist at AGF Investments, wrote in a note to clients last week. “That’s the big fear.”
Valliere estimates that there is “at least” a 30% chance of a “contested” election that could ultimately be ruled by the Supreme Court.
‘Markets Can Tolerate a Blue Gulf’
The best case scenario for Wall Street would probably be a Trump re-election. Shares boomed in the early years of the Trump presidency in part because of the embrace of its low-tax administration and light regulation. (However, Trump’s trade wars were far less popular with investors and caused stocks to tumble at times.)
However, markets were largely unaffected by Biden’s rise in the polls.
Kotok suggested that this is because a Biden administration would bring a welcome dose of stability compared to the volatility of the Trump era.
“Markets can tolerate a Blue Wave, although taxes will increase and things will change,” Kotok said. “Markets are full of chaotic government.”
At this point, few on Wall Street will be shocked if the election results are not immediately known. It is reasonable to assume that it will take time, especially in a narrow election, to count the post-in votes.
“A lack of immediate U.S. election results this fall appears unlikely to haunt capital markets,” Todd Jablonski, chief investor at Principal Global Asset Allocation, told CNN Business in an email.
Fix your site links this fall
In contrast, a situation in which the results are disputed could shake investor confidence.
“I believe the worst outcome would be a longer standoff to the election results,” Kristina Hooper, chief global market strategist at Invesco, wrote in an email to CNN Business, although she added that it might not have a “dramatic” impact on stocks. has prizes.
Thomas McLoughlin, head of America’s fixed income at UBS Global Wealth Management, said investors could flock to safe havens such as gold and U.S. governments in the event of a contested election.
“Investors need to be prepared for volatility in the event of an unprecedented outcome. Markets hide uncertainty,” McLoughlin wrote in a note to clients this week.
The problem is that there is not much historical context that leads investors to think about a disputed election.
That distance haunted investors clearly. The S&P 500 tumbled nearly 12% from closing on election day after the December 20 slump, according to RBC Capital Markets. Gold prices, on the other hand, shot up sharply.
The Trump factor
Of course, the repetition of 2000 is not exactly parallel.
Unlike Bush and Gore, Trump has a history of shattering norms, unpredictable behavior, and challenging the institutions of America. Few wondered whether Bush or Gore would eventually open the election for Inauguration Day, but that is a different possibility with Trump, he would challenge the election results.
In other words, all bets are off.
Asked if the president will not accept the election results unless he wins, White House Press Secretary Kayleigh McEnany said Wednesday that “the president has always said he will see what happens and a provision in place. will make the aftermath. “
But will the real economy fluctuate?
However, long-term investors would be wise not to overreact to election-related turbulence.
Yes, a contested election could rattle investors and perhaps even boost consumer confidence.
“The impact on the economy from a contested election would be negative,” Hooper of Invesco said.
And even if it slowed down, a contested election would do nothing to change the real driver of stock prices these days: unusually easy money from the Federal Reserve.
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