Will The Election Take A Backseat to Coronavirus?

At a Glance

  • If cases continue to spike, COVID-19 will continue to outweigh the November election in the minds of market participants, says CME Group Senior Economist
  • Coronavirus could remain front and center for markets until “a couple weeks away from the election” says Scott Bauer

Can the election pull back the focus from coronavirus? That’s a big question facing market participants as they navigate the rare combination of a pandemic and Presidential election cycle.

Typically, campaign news dominates the attention of market watchers in the months leading up a Presidential election. But as COVID-19 continues to surge in some places, the prospect of the virus remaining the top driver of equity markets for several more months looks strong.

“I think the coronavirus is going to stay front and center until we get literally a couple of weeks away from the election,” Scott Bauer, CEO of Prosper Trading Academy says in our latest OpenMarkets Roundtable above.

Bauer joined Jim Iuorio, Managing Director for TJM Institutional Services and CME Group Senior Economist Erik Norland for a discussion about whether the U.S. election will reclaim its usual spot as the top news driver for financial markets in an election year.

In 2016, the S&P 500 saw major volatility in the immediate aftermath of the November election with E-mini S&P 500 futures dropping 6% before recovering later that day. That was largely due to the surprise result. Bauer says market volatility this time around could be lower because the two candidates represent better known agendas than did President Trump in 2016.

“That unknown is now removed from the equation. We’ve had four years. We know what (the President’s) agenda is like. I don’t see the massive volatility we saw in 2016,” he says.”

While the campaign may not bring about high levels of volatility, the possibility of a new spike in virus cases hangs over the U.S. and other economies.

“The big question is do we have a second flareup of it?” says Norland. ” That could have very significant consequences for equity markets.”

Watch the full OpenMarkets Roundtable discussion above.

Evan Peterson is director of corporate marketing at CME Group and managing editor of OpenMarkets.

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