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Dump All Risk, Find The Best Haven, And Reevaluate Later 

By Stephen InnesMarket OverviewOct 02, 2020 02:06AM ET
www.investing.com/analysis/dump-all-risk-find-the-best-haven-and-reevaluate-later-200539698
Dump All Risk, Find The Best Haven, And Reevaluate Later 
By Stephen Innes   |  Oct 02, 2020 02:06AM ET
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The risk-off reaction to Trump's positive COVID-19 test feels like the last of the Biden pricing is getting done. The quarantine will mean he misses three swing state rallies—with critical Florida among them. It also means the next debate will need to be shifted. Currently, oil is the worst performer, down just over 2%, followed by the e-mini down 1.8%. Interestingly, Treasury yields haven't risen (no go dollar as expected).

Biden spending plans might have been expected to drive demand into UST, but gold is a better hedge as the market tuns off the dollar; the yen's gain is as expected, but the bid for CNH stands out also.

Another rough day in the oIl patch as the weakest link of the bunch is getting absolutely hammered. 

There's no news on when/where US President Trump contracted COVID-19, but with a close aide, Hope Hicks, having tested positive and as Bloomberg notes, having flown on Air Force One on Tuesday to the Cleveland rally, that looks a likely time. There are plenty of pictures from Trump and others, including Vice President Pence, talking without masks. With senior White House staff operating in a very tight bubble, the next stages will be the test results for everyone on the Ohio trip.

I suspect there are emergency contingency meetings underway now with could lather the market with stimulus.  
 

Can Trump Cancel/Postpone The Election?
No, this cannot be done via executive order. Article 3 of the US Constitution requires legislation enacted by Congress and signed by the president.
A Biden presidency and Democratic sweep of Congress has been increasingly priced in this week based on prediction markets. That should boost expectations for fiscal stimulus in 2021 and drive US equities higher and USD/JPY upside, such as in late 2016, on a steeper nominal UST curve and a growing US-Japan real-yield gap.

Democratic Sweep Is Now My Election Call

Lots of forks in the road 

Still, as we see, the initial reaction is a shift to massive haven demand and provides more cause to cut all risk into the weekend, but I'm not sure the US dollar is the place to be, a safer haven in the JPY. 

Rumors have been kicking around all morning. Now that the cat is out of the bag. I'm assuming Biden moves big in the polls market moves from pricing 60 % to 90 % certainly of a Democrat win in the polls with Trump all but toast.

Election risk fades, now it's down the stimulus now or later, and if the Republican Senate votes YES out of political self-preservation or bends the knee, then later tonight risk could stabilize. Still, oil remains the weakest link to the COVID headlines as it reinforces the view that anyone, even the commander and chief, is susceptible to the virus 

Dump All Risk, Find The Best Haven, And Reevaluate Later 
 

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Dump All Risk, Find The Best Haven, And Reevaluate Later 

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Comments (3)
Ron Love
Ron Love Oct 03, 2020 8:29AM ET
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Absurd article. Trump gained 3% in the polls after the first debate.
Jan Buyle
Jan Buyle Oct 03, 2020 8:29AM ET
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He did NOT!
Terence Williams
Terence Williams Oct 02, 2020 3:39PM ET
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Making election predictions based on todays news. I dont see it. A democrat sweep..unlikely.  A big move in the polls is one very big assumption. Good luck.
John Bowman
John Bowman Oct 02, 2020 3:55AM ET
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Thus with election risk down and stimulus potential up isnt that positive for the market ?
Chris Poulos
Chris Poulos Oct 02, 2020 3:55AM ET
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the obstinacy of the GOP knows no bounds. they will not pass a stimulus bill on a train, they will not pass one on a plane. they will not pass one sam i am, to the last one they have no brain.
Mark Hoffman
Mark Hoffman Oct 02, 2020 3:55AM ET
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Risk down for whom? Not sure if you noticed, but the market isn't a big fan of a bunch of Marxists assuming power...
Mark Hoffman
Mark Hoffman Oct 02, 2020 3:55AM ET
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Election risk down? For whom? Not sure if you've noticed, but the market isn't a big fan of a bunch of Marxists taking power..
 
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