“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.