October 2, 2020

Trump Catches Coronavirus, What Is The Risk For Markets?

Trump Catches Coronavirus, What Is The Risk For Markets?

President Donald Trump and First Lady Melania Trump have tested positive for Covid-19. This news has brought about a massive knee jerk reaction for the U.S. stock market. The Dow Jones Industrial Average futures plunged over 500 points on the back of this news. Investors are running for safety, as there is an exuberance of volatility. The gold price has shot above the $1,900 mark, and investors are favouring risk-off assets.

The breaking news of President Trump catching the coronavirus has raised many questions for investors, especially because the U.S. presidential elections are just around the corner. The biggest question for investors and traders is how this situation is going to impact Trump’s presidential campaign?

If Trump feels well and carries on with most of his campaign functions from the White House, the damage may not be that significant.

Will The U.S. Election Data Move?

Investors also wonder if Joe Biden also has Covid-19 given the fact that Trump and Joe Biden had their first presidential debate this week. During the presidential debate, Joe Biden and Donald Trump didn’t shake hands, so the odds aren’t that strong for Joe Biden to be infected. However, if Biden’s test also comes back positive or if we hear same more troubling news over the coming days, investors will start to wonder if the U.S. election date will move as a result of this.

Does This Change the Odds of Trump Winning The Election?

President Trump carrying the coronavirus doesn’t necessarily change the odds for either winning or losing the election. There are some rumours that Biden’s odds have increased dramatically because Trump has the virus and this shows the mishandling of the virus situation. 

Americans already know how Trump has dealt with the coronavirus situation and American people have already made up their minds in terms of who they are going to vote for in this presidential debate.

Hence, I think that the current reaction that we are seeing in the markets is mainly shock at this news. The news has ranched up the uncertainty in the markets in terms of policy and investors do not like uncertainty.

What Is The Biggest Risk For the Stock Market?

One possible risk associated with this situation is how Trump carrying the coronavirus has changed the prospects of second stimulus fiscal support. The White House needs to be involved in the second stimulus aid package negotiations. Investors are wondering now whether there will be any positive news over the coming 14-days on a stimulus package, and if there is not, what does this mean for the fragile economic recovery in the U.S.?

The economic data is telling us one thing very clearly; the U.S. economy doesn’t carry the same momentum that it had a few weeks ago. Pretty much every single day, we are hearing news about further job losses, and this is not an ideal situation for the U.S. economy or for the stock market. The U.S. economy needs more fiscal help, and in the absence of such, the U.S. economy is likely to suffer a lot.

The U.S. Jobs Report 

In terms of economic numbers, we have the mother of all economic data due today—the U.S. Jobs report. The forecast for the U.S. Non-Farm Employment change is for 900K while the previous reading was at 137K. The U.S. unemployment rate is expected to fall further today; the forecast is 8.2% against the previous reading of 8.4%.

The Dow Jones, S&P 500 futures are likely to remain highly sensitive today as there is ample volatility in the markets.

Stock Market Today

Over in Asia, the stock market took a nose-dive during the final hours of trading. The Shanghai index declined by 0.20%. The Nikkei stock index fell by 0.67%, while the Hong Kong’s stock index, HSI soared 0.79%. The Australian stock index declined by 1.46%. 

Coronavirus Update

The global coronavirus confirmed cases topped the 34.2 million mark, and there have been over 1.02 million deaths caused by this virus so far. The coronavirus confirmed cases for the U.S. is 7.2 million and nearly 207, 791 Americans have lost their lives. India remains the third-worst country hit by coronavirus with over 6.3 million Covid-19 cases.

Dow Jones and S&P500: Market Breadth

The Dow Jones’ market breadth remained unchanged yesterday. 63% of the Dow Jones stocks traded above their 200-day moving average yesterday.  

The S&P 500 stock breadth saw some recovery yesterday.  59% of the shares traded above their 200-day moving average yesterday. This is a change of +2% from a day earlier.  

S&P 500 Leaders and Laggers: Etsy and Haliburton

Etsy stock contributed the biggest gain, soaring 8.27%. Haliburton stock was the largest drag; it fell by 7.3%. The S&P 500 stock index is up 2.6% so far this week.

Dow Jones Leaders and Laggers: Visa and Caterpillar

Visa stock advance higher by 1.69%, and was the biggest mover for the Dow, while Caterpillar stock dropped 1.64%, the biggest drag for Dow Jones industrial average index.