“The president’s result came after he spent months playing down the severity of the outbreak that has killed more than 207,000 in the United States and hours after insisting that “the end of the pandemic is in sight.”
Source: https://www.nytimes.com/2020/10/02/us/politics/trump-covid.html
The surprising news that President Trump contracted the virus last Friday has added a new element of uncertainty to the financial markets, especially given its proximity to the Presidential election next month.
Several prominent politicians have tested positive for the virus and have since recovered, the most notable one being Boris Johnson, Prime Minister (PM) of the United Kingdom (UK). Should President Trump’s current health situation improve, traders can potentially expect markets to recover from this shocking event, just like the UK did when PM Boris Johnson pulled through from the COVID-19.
However, there are definitely broader implications worth considering and planning for:
#1
The probability of more stringent Covid-19 measures across the United States (US) has increased. President Trump has been pushing for the economy to open further and has downplayed the effects of the virus consistently. Will the situation now change after he and the First Lady have both contracted it? Only time will tell, but the likelihood has certainly increased and the ‘forward-looking’ stock market will definitely be taking this negative scenario into account.
#2
President Trump, the master of showmanship, will certainly choose to downplay how the Covid-19 is affecting him. We can expect reassuring messages from the White House during his quarantine period, which will move markets when announced. More importantly, he may also continue his classic ‘distraction’ tactics, such as continuing his attack on China and implementing more punitive measures against them. Given his single-minded focus on winning the elections this time round, it makes this scenario even more likely. Under no circumstances will President Trump risk further deterioration of his polling figures with him testing positive for Covid-19.
#3
There could also be a positive effect on this. To shore up support and the financial markets, a deal on fiscal stimulus with the Democrats will now be more likely than ever. If this happens, it will be a big positive for the stock market due to a fresh bout of liquidity flooding the economy.
Overall, this market-moving event will only create more volatility for the stock markets, and traders can expect more money flow into safe haven assets like Gold and defensive stocks.
