If you’re reassessing your outlook for equities (or any other asset class) Friday in the wake of Donald Trump’s positive COVID-19 test just weeks ahead of the election, you’re not alone.
The implications of the news will obviously depend on the evolution of the president’s symptoms (which is just a euphemistic way of saying that everything now depends on whether he pulls through ok), but the general narrative is that the diagnosis makes deflecting voters’ attention from the epidemic impossible, thereby bolstering Democrats’ message and diluting the impact of the Supreme Court nomination.
If Trump recovers quickly, he’ll be able to get back to campaigning (and he’ll doubtlessly campaign on Twitter anyway), but the inability to make public appearances, at least for the next seven to 10 days, is a serious blow to a man who depends in part on raucous rallies to keep the base fervent and engaged.
Read more:
This ‘Risks A Rapid Change To The Market’s Assigned Election Probabilities’
For their part, JPMorgan is sticking with their cross-asset outlook and price targets for the time being.
“The current development across various scenarios for the President’s illness slightly increases Biden’s chance of winning, which could marginally reduce post-election risks and market uncertainty”, the bank’s Marko Kolanovic wrote Friday, in a note with Dubravko Lakos-Bujas.
Kolanovic also posits a pair of possibly constructive scenarios for Republicans. It’s possible, he writes, that “a combination of voter sympathy, turnout, and an asymptomatic or mild virus outcome boosts Trump’s election chances [by] vindicating his strategy of opening by example”.
This is at least plausible, and Marko isn’t the only person to suggest such an outcome Friday. I touched on it earlier here.
I suppose what I would emphasize is that while the Jair Bolsonaro approach (so to speak) may resonate with many voters, it could also backfire, especially among those who have lost family members or friends to the virus.
Kolanovic floats another outcome tied to “a significant health deterioration” for Trump. That, Marko writes, could “act to lower tensions and animosity on both sides of the aisle, paving the way for national reconciliation”.
While it’s doubtlessly true that tensions would temporarily come down if Trump’s condition were to take a material turn for the worse, animosity would continue to bubble beneath the surface.
The “rally around the flag/leader” phenomenon is well known, but Trump is as divisive a personality as US politics has ever seen, and the divisions in American society (e.g., racial inequities and gross wealth inequality) run deeper than one man.
In any event, Kolanovic and Lakos-Bujas maintain their positive stance on equities. The bank’s year-end, scenario-weighted S&P target stays at 3,600 — for now.
Importantly, Marko reiterates JPMorgan’s view that cyclicals and value will outperform “under any election outcome”.
Based on the rapid recovery to what was a relatively small stock market sell off (without knowing the severity of Trump’s illness), it seems like the market has shown us a few of its cards.
Primarily, that the prospect of Trump being out of the presidential office is not a problem for stocks.
You think that maybe the demise of POTUS who has been attempting to weaponize the armed wing of the RNC may encourage people to put some risk on?
I very much enjoy the color provided in your posts by any number of analysts that you frequently quote. For me the two standouts among them are Aleksandar Kocic and Marko Kolanovic for their intellectual rigor and ability to address issues and their ramifications beyond just their impact upon markets.
Of the two Kocic comes across as more philosophical with something of a humanist touch. Kolanovic, in turn, appears to be every bit the scientist who strives to remove emotion from his analysis.
Kolanovic is brilliant in being to apply mathematics to real world concepts, but I like McElligott for being more wiling to apply his personal interpretations.
Speculations regarding sympathies/sentiments based on POTUS course of illness are irrelevant when virtually all voters have decided already. In fact I’d venture to say there’s been very little “deciding” since January 2017 or even earlier.
It never ceases to amaze me that anyone would vote for Trump after the last four years.
Everyday a quote from my grandfather has proven true, “Never underestimate the power of human stupidity.”
He is undergoing treatment with Regeneron’s experimental antibody. That he is receiving experimental treatment speaks partly to the perceived severity of his response to infection as side effects are not well understood. The statement from Regeneron also supports this concern, “The greatest treatment benefit was in patients who had not mounted their own effective immune response, suggesting that REGN-COV2 could provide a therapeutic substitute for the naturally-occurring immune response”.
So it seems that POTUS is not mounting an effective immune response. This is the type of condition that has led to so many deaths. Even is we hate his policies and approach to problem solving we can call on our humanity to hope he pulls through without debilitating after effects.