Markets volatility

The Best-Laid Plans Of Traders And Pollsters

Escalating rhetoric from Donald Trump and lingering suspicions that, after 2016, the polls can't be trusted, are keeping market participants on edge. Although the president's chances of reelection are now low enough that even Lindsey Graham is telling Fox News he might lose (and that's to say nothing of Graham's own trials and tribulations) it's difficult to escape the feeling that various polling and betting odds don't tell the whole story. Importantly, don't forget that when it comes to near-term, tactical considerations for market participants, the margin matters perhaps more than the outcome. Obviously, the vast majority of humanity has a strong opinion on who they'd like to see prevail next month, but a hypothetical, emotionless trader (e.g., a robot) will care more about the margin of victory/defeat when assessing how to maneuver around the event. The figure (above) is from the latest edition of BofA's Global Fund Manager survey and the message is crystal clear. When it comes to outcomes with the potential to inspire volatility, a contested result is seen as particularly dangerous. While there's some risk of Biden contesting the results in the event Trump manages to pul
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5 comments on “The Best-Laid Plans Of Traders And Pollsters

  1. runamok says:

    Further read is that Treasury rates anything are not going up. If Dems take the Senate and WH, it’s still months for stimulus funds to get into the economy’s veins. Crude might jump immediately, but who cares. A split of WH and Senate is instant stagflation and no hopes for reflation. Regardless of political leanings, Dems taking Senate and WH is better for portfolios looking for reflation juice.

    Too soon to go in on crude, XLE, and XOP.

    And all the homeless people, presumably most having had both jobs and housing nine months ago, now living in parks, just trying ot survive. Still, at least until spring before they can start getting back on their feet if Senate and WH go to Dems. If split, these people are going to have fewer options yet.

  2. dayjob says:

    I’d be curious to see a ranked-choice version of chart 1 so we could see what all those in the “contested election” bucket see as the next highest risk. As was discussed here and yesterday, the economy is in for a lot of pain if Biden takes the White House and Republicans take the Senate.

    The other thing to note is the Trump winning scenario. Trump is already highly volatile. Do these fund managers foresee Trump becoming less volatile when not facing reelection? I have a hard time believing that those two scenarios would lead to less volatility than a blue wave.

  3. PJSPHD says:

    A risk not mentioned: a scorned Trump who scorches the American landscape on the way out the door. Have you ever terminated a true narcissist? It’s not pretty.

    The Cabinet better be ready with the 25th, although Barr may write his game plan.

  4. joesailboat says:

    Trump does have some history of accepting defeat. Let us pretend he does care about his legacy. If trash the country so Mitch can win it back again 2/4 years from now is obviously depresionary and taints Trumps legacy would he not push fiscal spending even if he loses election to save his place in history. That requires some thought on his part.
    But yes, assume the worst, hope the best.

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