Wall Road is not overly involved that Trump can topple Reuters’ election
© Reuters. FILE PHOTO: A sign for the Wall Street subway station can be seen in the New York Financial District
By David Randall
NEW YORK (Reuters) – U.S. stock investors have raised concerns that President Donald Trump’s efforts to contest the U.S. election without evidence could temporarily disrupt markets, but few seemed seriously concerned about the challenges to the results will be successful.
Before the election, analysts said a major risk to the stability of the financial markets was the possibility that Trump would challenge the result if he lost or turned down his office.
Despite this scenario, the S&P 500 benchmark index has risen about 6% since election day. Sectors expected to outperform under President-elect Joe Biden, such as cannabis stocks and clean energy, are rising. Private prison stocks have decreased by 8% or more, reflecting Biden’s proposal to end federal use of private facilities.
“The market believes the Biden win is unlikely to be undone,” said Maneesh Deshpande, head of equity derivatives Barclays (LON :).
He said market performance was in line with Wall Street’s preference for a clear winner rather than a lengthy litigation similar to the 2000 election. Then the outcome was in the air for five weeks until the US Supreme Court ruled Florida its Must end the recount, and handed the election to George W. Bush.
That year, the S&P 500 fell 7.8% between election day and year-end, according to CFRA Research, as post-election turmoil fueled volatility associated with the bursting of the tech bubble in the late 1990s.
Despite the market move, some remain concerned that Trump and several Senate Republicans are still claiming without evidence that Biden did not legitimately win.
Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets, said in a note Monday that she was concerned about how the actual transfer of power to the president-elect works and “When (and WILL) Republicans and Trump admit?”
“With the markets exuberant today, I worry about the days, weeks and months ahead,” said Silverman.
Overall, refinitive data shows that options markets are pricing in a surge in volatility in January that is compatible with a transfer of power to a Biden administration, and does not reflect an increase over the next few weeks that a lengthy electoral competition would bring.
Market expectations for volatility are higher in late December to early January, for example when Georgia’s runoff election on January 5 for its two seats in the US Senate decides whether Biden’s Democrats can gain majority control over this chamber.
Moody’s (NYSE 🙂 Investors Service warned in a statement Tuesday that the ongoing legal challenges to Biden’s proposed victory could unsettle markets and create social tensions that could have a material impact on US recovery.
Still, Moody’s assumed that “US institutions will eventually solve these problems without causing a significant, permanent credit impact.”
Biden has surpassed the 270 electoral college vote threshold required to win the presidency after four days of election counting on Saturday with victories in battlefield states like Pennsylvania, Wisconsin and Michigan. Biden leads in two of the four states that have not yet been called, and leads the referendum with more than 4.4 million ballots, with more ballots still to be counted in firmly democratic states like California.
Trump has yet to admit what breaks with the longstanding tradition and so far has blocked millions of dollars in funding for Biden’s transition and hampered his ability to meet with officials from intelligence and other departments.
These efforts are unlikely to affect market positioning for a Biden presidency, said Lamar Villere, portfolio manager at Villere & Co.
“I don’t think Trump’s concessions will have any impact on what the market expects,” Villere said, adding that “nothing can be said” preventing Biden from taking the presidency in January.
Brad McMillan, chief investment officer at Commonwealth Financial Network, said investors were less concerned about Trump’s ability to block the election results than they were about the possibility of Georgian voters handing control of the Senate to Biden’s Democrats on Jan. 5.
“The story from early November was that everyone was feeling good, that the world wasn’t going to end,” McMillan said. “The story for the rest of the month should be how investors start to worry again.”