A Day Before U.S. Presidential Elections: What’s at Stake for Wall Street and Global Markets?

UTC by Bhushan Akolkar · 3 min read
A Day Before U.S. Presidential Elections: What’s at Stake for Wall Street and Global Markets?
Photo: Depositphotos

Markets remain on the edge a day before the U.S. Presidential elections. Volatility is growing as this week has some big announcements from the Federal Reserve and policymakers. The surge in COVID-19 in the U.S. and Europe puts major pressure on the markets.

It’s just a matter of a day when 260 million registered voters in the United States will elect their 46th President. This U.S. elections include a tough battle between the current Republican President Donald J. Trump and his Democratic Party opponent Joe Biden.

The stakes are also high for Wall Street and the global markets as investors wait on the edge of their seats. The U.S. stock market remained volatile for the last week. All three indices – Dow Jones, S&P 500, and Nasdaq – corrected 5-6%. Apart from the Presidential Elections, the rising COVID-19 cases in the U.S. have been another concern to the market.

Several countries of Europe are already considering another phase of lockdown while the U.S. has again reached close to 100,000 cases a day. Apart from the U.S. election results on Tuesday, November 3, there are a few more big events scheduled. The Federal Reserve will update its further line of action on the economic policies. Later on Friday, the U.S. Labor Department will update the jobs report.

During President Trump’s tenure in the last four years, Wall Street enjoyed a great bull run. Until mid-February 2020, the markets were trading at an all-time high followed by the market crash in March 2020 on account of the coronavirus pandemic. Also, a lot will depend on the outcome of the Presidential Elections.

So far, opinion polls have been suggesting a Joe Biden victory. Analysts say that a clear majority on either side will be favorable for the market. This is because lawmakers will get higher control over the decision-making process. On the other hand, a close contest can put pressure on the market.

Here’s What Market Analysts Have to Say

Speaking to MarketWatch, Stephen Dover, head of equities at Franklin Templeton, said:

“If the Democrats gain a strong majority in the Senate there is likely to be more legislation that will affect the markets and there will be sentiment shifts in many sectors of the market”. He further warned that any uncertainty could “add to volatility in the market until resolved which, because of runoff races, might not be resolved until January.”

However, Katie Nixon, chief investment officer at Northern Trust Wealth Management, sees the rise in COVID-19 cases as the biggest risk factor. She said:

“Given the global ‘risk off’ tone of the market this week, it is clear that the rise in Covid-19 cases across Europe and the U.S. has taken center stage in terms of key risk factors. With memories of March and April fresh in investors’ minds, many are fearful of a repeat, and this fear has been supported by the announcement of various restrictive measures taken across Europe.”

On the other hand, the European market started today on a good note. The European stocks advanced on account of the strong manufacturing data from the Eurozone.

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