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Wall Street Week Ahead: Trump-Biden debate could spark stock volatility

Published 09/25/2020, 07:11 AM
Updated 09/27/2020, 09:55 AM
© Reuters. FILE PHOTO: People vote at an early voting site in Fairfax, Virginia

© Reuters. FILE PHOTO: People vote at an early voting site in Fairfax, Virginia

By Noel Randewich

(Reuters) - Some U.S. stocks could face more volatility next week as President Donald Trump and rival Joe Biden face off in their first debate ahead of a November election that betting services currently view as almost a coin flip.

A strong performance in Tuesday's debate by Biden, who currently has a modest lead in betting odds and polls, might boost stocks related to global trade and renewable energy, while a perceived debate victory by Trump could benefit fossil fuel and defense companies.

The first of three scheduled debates comes at a fraught moment on Wall Street.

The S&P 500 tumbled around 10% from record highs in recent weeks before paring some of those losses on Friday, as investors worry about a prolonged recovery from the coronavirus and uncertainty related to the Nov. 3 presidential vote, including the possibility of a delay in announcing a winner.

If one candidate emerges stronger on Tuesday, "the debate could be an individual stock and sector play," said Jack Ablin, Chief Investment Officer at Cresset Wealth Advisors.

"For example, I think life under Biden would be a lot simpler for Apple (NASDAQ:AAPL) than life under Trump," Ablin said, referring to Trump's trade conflict with China.

Individual stocks and other assets have been susceptible to market moves as a result of debates, even as broader markets have generally shrugged them off.

The Sept. 26, 2016 debate between Trump and Hillary Clinton, for example, sparked a 2% surge in the Mexican peso, as well as moves in oil, gold and Treasuries, according to a University of Michigan and Dartmouth College study.

Many investors view Biden as more likely to raise taxes, and see a second term for Trump, who favors deregulation, as better for the overall stock market. At the same time, a Trump win could spark concerns over ramped up tensions between Washington and Beijing.

With expectations of a delayed vote count, the options market shows investors are bracing for volatility in November and December. Trump declined on Wednesday to commit to a peaceful transfer of power if he loses, and said he expected the election battle to end up before the Supreme Court.

Adding to political uncertainty, betting websites are offering odds giving Biden a 53% chance of beating Trump, down from as much as 61% in early August, according to RealClearPolitics.

A Biden win could boost the S&P 500 by about 1% the following day, while a Trump re-election would push the index down about 4%, according to an analysis by Cornerstone Macro based on a statistical comparison of recent asset prices and election betting odds.

"A possible interpretation of this result is that markets have increasingly priced in a Biden win and view the alternative as posing some risks, possibly stemming from potential escalating trade tensions or similar factors," Cornerstone Marco wrote.

Gullane Capital Partners LLC, a hedge fund in Memphis, Tennessee, is focusing on each presidential candidate's likely effect on specific stocks it owns, rather than what each candidate might mean for Wall Street as a whole, said Managing Partner Trip Miller.

"Biden is good for some of our businesses, like solar, and Trump is better for some of our other businesses that benefit from lighter regulation," Miller said.

UBS in a report this week predicted that a second term for Trump would have little effect on healthcare. On the other hand, a Biden victory would lead to only modest changes, rather than a major overhaul of health insurance, even if Democrats took control of the Senate.

© Reuters. FILE PHOTO: People vote at an early voting site in Fairfax, Virginia

"We believe that the rhetoric on changes to healthcare policy exceeds the reality of what can be accomplished," UBS analysts wrote.

Latest comments

Lol I can't believe America is still supporting this 🤡 in the OTUS, Republican's I feel bad for your party's representative. P.S. please tell me how y'all justify the $70,000 he wrote off on his taxes? or How he paid only $750 for his taxes and got away with it? #ProfessionalScammer
I like the y’all...but the rest of the post can go.
Biden wins / Gold $5000.00 in 12 months. Federal Reserve gives up.
i will sell gold to you today for 2,000 and by January you will be up 150% !
Biden has been really showing improvement in his energy levels the last few days. He just gave a speech for over 20 minutes to a crowd in a Burger King. He said its about time we get things back. And he said we could do so much better if we tried. So I'm gonna be supporting Biden because he's got the plan we need.
that is a good. crowd sizes are perceived relative to the size of the venue. so in a Burger King even Joe Biden may seem relatively relevant.
🤡😂😂😂
Biden reminds me of movie, Weekend at Bernie's" Great movie. Biden got my vote.
They need to put a labels on all Reuters articles that reflect the authors grasp on reality. The range could be 1-10 with 1 being “On LSD” and 10 being “None at All”.
Trump 2020 to 4040. Fact: only dumdumz vote for Biden
Fact: only dumdumz think an American president can stay in office for 24 consecutive years. (And only dumdumz think Trump deserves more time to trample on the Constitution and democracy).
I think its best you dont say anything please
half are dumdums, they other half they actually haite American deeply.
Dont b a L. I invest in solar, green energy during Pres Obama because i listened to news. Most of them were scam, i lost big. Again i invest in oil companies for the last 4 years, i loose big. Listen to news n invest is a loosing strategy. Invest in what u know best.
I'm getting tired about all the cribbing about Reuters here when the story says: "Many investors view Biden as more likely to raise taxes, and see a second term for Trump, who favors deregulation, as better for the overall stock market. At the same time, a Trump win could spark concerns over ramped up tensions between Washington and Beijing." This isn't a fact? Whether we use Reuters or Bloomberg or Associated Press or Fox News, fact is fact.
companies which would benefit from a 2000 like stalemate: smith and wesson, remington, heckler and kotch...
huawei will benefit more than apple from biden victory.
The article never said what time the debate is at or what network it will be available for viewing.
thats because the less people see the show the better...they might not want to see sleepy Joe snoring...
Great point. Twisted media propaganda. They just want you to read their opinion, but they don’t want you to form your own, they just want you to be brainwashed by theirs.
Hope, biden wears a mask and diapers going to debates. Safety is paramount.
Dan is a bot. Ignore
Stimulus is on the way for next week ! Trump will do the best for October before election! Be realistic !!!
Is this why AAPL hit all time highs under Trump?Oil stocks have continued to do terribly under Trump. The over simplification is easy to understand, but not even close to accurate. What drivel!
Absolutely ! 100% agreed with you
Stock market will crash if biden wins, tell the truth reuter is all lies
I think its not necessarily a bad thing actually. The stock market is heavily over-valued despite covid circumstances. The bubble needs to be stopped or at least mitigated before too late and burst out llke a disaster in 2008. We could also collect many great shares in favorable prices
2008 was a financial crisis, this is a health crisis
first of all why this crisis should perform like the past ones.be ready for future P/E ratios will be higher in the future not to do bubble or something but do to to much money chasing few goods. since 2008 we didn't had to many new companies
President TRUMP is the only true champion for the cause of the nation building. so let us build on him for a wide lead over Biden - the sleepy one.
The only thing Trump is building is a few short miles of useless wall that blows over in a strong wind. And since he lied about Mexico paying for it, he's using money stolen from the military budgets, based on a fake, made-up "emergency", to do it. There's nothing "champion-like" about that.
Doesn’t matter who the president is stocks only go up
we'll see about that.
The articles here are so left leaning it's like reading Biden Campaign propaganda. Trump wins and the Stockmarket continues on the path to even greater heights.
They took down all the TRUE and ACCURATE republican posts so yeah just more lift wing propaganda. Let the Left talk tgey will lose like normal and stocks will be back to all time highs early Jan
Biden sign should say “Vote early AND on November 3rd, 2020.” Cheating Dems!
vote early vote often.
If you recall, it was Trump who recently told his base to vote twice, not Biden or "the Dems". Nice try.
Context? Since mail-in voting is, in fact, secure, and double-voting us impossible, how, exactly, was he getting peoole to vote twice? Or are you saying mail-in is NOT secure and is subject to serious errors?
More Reuters drivel. America's best economy ever was created by President Trump before the Chinese virus was unleashed. Dem policies are anti-business and growth, and everyone knows it. Trump 2020!
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