Markets volatility

‘Buying No Matter What’: Risk Aversion And The Ghost Of 2016

Perhaps market participants are too comfortable in the assumption that Joe Biden will prevail next month in convincing enough fashion to make disputing the election outcome difficult for a notoriously litigious incumbent. Although most polls (not to mention betting markets) have Biden maintaining a sizable lead, Democrats have been keen to insist that the electorate, to the extent it does skew towards the former vice president, doesn't get complacent. Indeed, some liberal media outlets have chided Biden recently for not being vocal enough in the face of a veritable smorgasbord of controversial remarks from Donald Trump delivered during recent rallies and on social media. I talked at length about "the ghost of 2016" (as it were) last week, noting that fears of the worst-case outcome (defined in general terms as a prolonged period of uncertainty that drags into December or even January) are now widely seen as overblown. Read more: The Best-Laid Plans Of Traders And Pollsters But Morgan Stanley's Mike Wilson thinks the market may be too complacent. That's according to a phone interview with Bloomberg during which Wilson suggested that investors could still be in for a few weeks of
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2 comments on “‘Buying No Matter What’: Risk Aversion And The Ghost Of 2016

  1. MacroGuy says:

    Thanks for the tip Heisenberg. Always a great read from you.

  2. runamok says:

    I agree that a large stimulus is not a given. The “whoever wins, stimulus is coming” is not sure. The obvious scenario is if the Rs hold the senate and Biden takes the WH. We should expect a miracle, over night concern about how deficits matter, it’s too big already, blah blah blah. And the Rs will fall on their sword for everything, as usual, specific bailouts for specific industries. Meanwhile, all the SMEs close and job growth stops.

    I can also imagine as part of this scenario where the R-naught of COVID stays at ~1.0, and we muddle through with some weak, single-digit growth that paints the charts up and to the right, where there is some modicum of life as usual, though with 50k new cases and 1k deaths per day, until meaningful vaccine distribution starts in Q2.

    It would be a horrible calamity. NBER will call July 2020 as the end of the “recession” despite everything else pretty much in shambles through Q4 2021.

    We’re probably not quite half way through this yet. Curious to see how high interests go before the Fed comes out.

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