WEEK AHEAD: NOVEMBER 02

Short Description

The big day is here! The US election is this Tuesday and I lay out 3 possible Election Day scenarios and the way they could affect financial markets. I also rundown highlights from the economic calendar that includes the Fed meeting and NFP. Thanks! Rich

Video Script

US election: 3 scenarios for markets - THE WEEK AHEAD (Nov 2 - 6, 2020)

Hi everyone, I’m previewing what promises to be an epic week ahead in markets. The US election is finally here so I will lay out 3 possible election day scenarios and the affects they could have on financial markets - as well as give you a rundown of the economic calendar this week - which includes a Fed rate decision and non-farm payrolls.

Its been an interesting 4 years in financial markets under President Trump. Are you ready for 4 more? How about 12 more? Did you know that Franklin Delano Roosevelt - FDR for short - was elected for a record 4 times as President -the last one being in the middle of the second world war in 1944? Today that would mean Donald Trump is still President in the year 2032! But don’t worry, it can’t really happen. As of 1947, the 22nd amendment to the constitution says no person shall be enacted to the office of the President more than twice.

If you’ll be using that US election fact at your next dinner party, please click the like button - it really helps us spread the word about these videos!

It’s a huge week on the economic calendar. Monday kicks off with global manufacturing PMIs for October. On Tuesday the RBA set interest rates and its polling day in America. So while the voting takes place on Tuesday, the election result should be known by early Wednesday. On Wednesday there is October service sector PMIs as well as ADP unemployment. On Thursday we have the Bank of England and the Federal Reserve deciding interest rates and on Friday we have the monthly US jobs report. 

Four short years ago Donald Trump shockingly defeated Hilary Clinton to become President of the United States. Analysts had been predicting the stock market would lose half its value and the US dollar would be crushed in the event of a Trump victory. Dow Jones futures plummeted 800 points late Tuesday when the results swung in Trump’s favour. But by the end of Wednesday, the Dow had erased all those losses and finished up 256 points and 40 points shy of a record high.

Let’s go through the 3 different scenarios. First is what the polling currently suggests - a clear Biden win. The key is the Swing states. If Biden is so far ahead of Trump in states like Florida and North Carolina, it won’t even matter about counting votes in other states like Ohio and Iowa. The certainty of the outcome and the idea of extra stimulus are a positive for markets, while a risk-factor is Biden seems a lot more willing to shutdown the economy in another nationwide lockdown in response to the pandemic than Trump.

Next is a clear Trump win. It’s not the expected outcome so some investors might be forced to rapidly change positions, causing a jolt to markets. Ultimately the reaction should still be positive given the prospect for tax cuts but with the added uncertainty of how Trump will tackle the second wave of COVID-19 and phase 2 of the US China trade deal.

Last is the market’s worst nightmare - that’s an unclear or very close result. President Trump has consistently said the election is being rigged so if he loses by a small margin, he might refuse the peaceful handover of power. If he were to do so, the decision over who won the election could go to the Supreme court - where Trump just had a new judge elected - like it did in 2000 when George W Bush narrowly won. That could mean days of uncertainty to juggle with rising COVID cases. Right, that’s the 3 possible scenarios, let’s see which one happens.

Thanks everyone, good luck trading and make sure to subscribe to our channel so you don’t miss the next video.