Tempting as it is, it’s usually dangerous to use the word “unprecedented”.
While it’s true that everything which happens to anyone, anywhere on a given day is by definition “unprecedented” (because there has never been a “today” before today), history does rhyme and, yes, sometimes it even repeats. Read enough, and you’ll discover some manner of precedent for almost everything.
With that caveat, I think it’s entirely fair to describe the circumstances facing Americans (and, more narrowly, US market participants) as something akin to unprecedented.
Coming into the week, the country was already staring down arguably the most pivotal presidential election in modern history. And it’s set to take place during a pandemic which has killed more than 200,000 people in the US. At the same time, the country has seemingly reached a breaking point with various manifestations of inequality.
At home, the election is framed as both a referendum on the incumbent’s handling of the epidemic and as a kind of plebiscite on whether it’s finally time for the country to earnestly address its “original sin” (slavery) and work towards remedying myriad inequities which, if allowed to proliferate much further, could transform the nation into a kind of three-tiered aristocracy, wherein a handful of people (primarily tech CEOs and tech company founders) control almost all the wealth, a “lower” echelon of the super-rich (e.g., “regular” CEOs, hedge fund managers, and “old” world business magnates) control what’s left over, and everyone else either has next to nothing or outright starves.
Abroad, the US election has monumental implications. The future of NATO is at stake. Relatedly, the Kremlin is facing the prospect of a return to “business as usual” vis-à-vis relations with the West which, under a Biden administration, would regain the full, unequivocal support of the US and everything that entails. Were Trump to lose, the Iranian people would see both a light at the end of the economic tunnel, but may view the odds of domestic regime change as diminished — a tradeoff some would gladly accept, even as others would lament the lost opportunity. While Biden’s policies towards Beijing would likely be antagonistic, they would be some semblance of “sane”, for lack of a better descriptor, and that could change the course of history by recasting relations between the world’s two superpowers.
This was already considerably more than any electorate (let alone an undereducated one) could possibly be expected to process. And then came the death of Ruth Bader Ginsburg and the ascension of Amy Coney Barrett, which injected (more) religious overtones into voters’ decision calculus.
As of Friday, the country is grappling with a sick president who has now contracted a virus he repeatedly downplayed in public, even as he privately expressed consternation about both its transmissibility and lethality.
It’s too much to compute. There are too many embedded contingencies to list. You can’t make a decision tree — it would have so many nodes and branches as to be useless if not wholly unintelligible. Perhaps that helps explain why equities managed to gain for the week.
Sure, you can sort out the flow catalysts and the mechanical “reasons” why stocks did what they did on the way to posting gains, but at this point, everyone is flying totally blind, at least when it comes to trading some fundamentals-based narrative. There just isn’t a way to formulate such a thing.
One headline on Trump’s health (positive or negative) could change everything. One headline suggesting Mitch McConnell is willing to herd cats in the Senate to push through a (still hypothetical) compromise stimulus deal between Steve Mnuchin and Nancy Pelosi could change everything. One (more) incident of an African American dying after interacting with police could change everything. If Mike Pence were to test positive, it could change everything. If Pelosi tested positive, it could change everything. And on, and on.
Late Friday, Kellyanne Conway said she has COVID-19. Senator Mike Lee, who sits on the Judiciary committee which will decide on Amy Coney Barrett’s nomination has COVID-19. Senator Thom Tillis has COVID-19. Senator Ron Johnson has COVID-19.
Again, there isn’t a way to process it all. But that won’t stop some folks from trying.
“There’s precedent for some of this”, Bloomberg’s Lu Wang and Claire Ballentine bravely ventured, in a piece published late Friday. They cite Sam Stovall, chief investment strategist at CFRA Research, in noting that “historically, presidential health shocks have had a fleeting impact on asset prices [with] everything from hospitalizations to deaths… mostly result[ing] in declines of 3% or less that lasted just a few days”.
I’m not sure I’d call that applicable in the current environment. I’m not sure I’d call it “precedent” either.