economy Markets

Nomura’s McElligott On Trump Virus News: This ‘Risks A Rapid Change To The Market’s Assigned Election Probabilities’

“Fresh tails” are piling up, Nomura’s Charlie McElligott said, in a Friday note, as the market struggled to digest news that the President of the United States now has a virus that’s killed more than 200,000 Americans over just eight months.

“The virus has infiltrated the highest levels of the US government”, McElligott wrote, flagging the age risk associated with some high-level officials and calling Friday’s news “another remarkable twist… into and around the election”.

Charlie largely echoes some of the cautionary remarks made here on Friday morning regarding the need for market participants to reprice the odds. “The timing of this now very public quarantine for two weeks during crunch time on the campaign trail (and after falling even further behind in the polls) risks a rapid change to the market’s assigned outcome probabilities”, McElligott cautions.

If the market was expecting or assuming a Biden victory, this news could entrench that belief, and may also impact close Senate races.

“It diminishes the chances to ‘turn’ the momentum, as well as polling which shows the public cares tremendously about the handling of the pandemic at the very least”, McElligott remarks.

Outside of the obvious health concerns, perhaps the biggest worry for The White House and Republicans is that news of Trump’s illness and the associated media obsession with the president’s quarantine will make it all but impossible for Trump to deflect attention from the epidemic and focus voters on Amy Coney Barrett.

It was already going to be a Herculean task to shift the electorate’s focus away from the epidemic and to the Supreme Court. Now, that strategy is lost, and you can expect Democrats to commingle a “We told you so” message to the public with their well-wishing vis-à-vis the president and the first lady.

For his part, McElligott goes on to say that Friday’s news likely also impacts “the market odds of an outright ‘Blue Sweep’, with most of the vulnerable Senate races being Republicans closely linked to the President”.

Obviously, a Democratic sweep would have tremendous ramifications for the market’s assumptions about the macro narrative, even if expectations for massive fiscal stimulus and government spending are in fact overblown.

Realistic or no, investors and traders believe that at the very least, a Biden administration and a Democratic Senate would set the stage for a shift towards things like the outright, explicit acknowledgement of MMT as the correct lens through which to view government finances, and thereby the institution of things like UBI, big infrastructure spending, and even the Green New Deal.

The bottom line: The market will now be compelled to reassess election odds and with them, “the state of long-term binary policy implications thereafter on possible regime change”, as McElligott puts it.


 

7 comments on “Nomura’s McElligott On Trump Virus News: This ‘Risks A Rapid Change To The Market’s Assigned Election Probabilities’

  1. At 64, I had a mild form of this virus. I was lucky and had time to sleep quite a lot. I have read toughing through the virus is not a good strategy. I had it ongoing for about 8 weeks, with bouts of tiredness. What does last 2 weeks is the contagious stage, but after you still feel really bad. It is about the 2-4 weeks stage I think that people are either going to the hospital or are going to turn the corner for the better. So Donald will feel bad till November and will likely have limited capacity through the election.

  2. derek says:

    I keep reading commentary about how equities need to “price in” Biden’s corporate tax proposals. My question to you folks is why should the impact on earnings matter? Earnings and valuations have not mattered for years, at least on a macro level. Why should that change now?

    • runamok says:

      Good points.

      Could just be more foolery, shade on the sheeple who think they will be enviably rich one day (but never will be).

      Vote for anyone left of a neo-conservative, and corporate taxes are going up. Vote for a neo-con and you’re nest egg will be $3,000 bigger when you retire. Sure, you’ll receive 20% of the SSI in retirement you were expecting, but your T-bond earnings on that extra $3k net yet $30/year. Win!

  3. libero says:

    i don’t know what to believe anymore. Very strange timing. He is just as likely to show up in 2 weeks all better declaring that he beat it. Trump the superman🤪

    • derek says:

      It appears that kind of strategy worked for “the Trump of Latin America”, Jair Bolsonaro.

    • runamok says:

      I agree. This would be the first tweet from Trump that is not a lie. What is the probability that he would stop lying long enough for one tweet a month before the election? Maybe a probability of 0.02?

      Could be a bunch of crap. Let’s get at least two, independently verified sources.

      If he goes to Walter Reed, could be for a different condition.

      We should expect at some point before too long, he’ll surface and say: “See, I had it, I got over it. It’s just like the flu. I told you and you didn’t believe me. The fake news is lying to you about the 210,000 people who died.”

  4. runamok says:

    Regarding the probabilities of “big infrastructure spending, and even the Green New Deal” of a Democratic sweep, a plus for the longer-term economy is that investments in productive areas will generate future economic returns, jobs, tax revenues, and industries. It’s about the children, right?

    I am a piss ant and mean nothing, but I would encourage them to take advantage of a sweep by seriously using government money, i.e., MMT, to invest in areas that the Chinese are a threat technologically of overtaking the U.S. These areas include bio, nano, AI, and down the list.

    I view the time horizon of outlook as a key, distinguishing factor of the two parties. Granted, the Democrats are not the Japanese, Germans, Chinese, or Singapore, when it comes to looking at building a stronger economy for the children. But, still, for the U.S. they are the only chance to move the needle on investment for the future.

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