Trump’s diagnosis puts uncertainty on overdrive

Wall Street is bracing for more election uncertainty after President Trump tests positive for the coronavirus.

Trump's Covid Diagnosis

2nd October 2020

Almost a month until Election Day, most polls show former-VP Joe Biden with a comfortable lead in national polls and a strong lead in many of the battleground states. The upcoming weeks were key for President Trump’s campaign and now it seems he will have to pause in-house rallies and fundraising events. In addition to President Trump testing positive for COVID, the First Lady, Melania Trump, Ronna McDaniel, Chairwoman of RNC, Hope Hicks, a senior trusted adviser and Senator Mike Lee have tested positive.

This is the most serious situation a US president has faced in decades.  The President’s illness will closely be watched as his symptoms have gone from initially mild to having a fever and to a trip to Walter Reed Hospital. He joins a list of world leaders who have contracted the virus. UK Prime Minister Boris Johnson, was much younger at 56 and eventually was hospitalized, while Brazil's Jair Bolsonaro had mild symptoms and Russian Prime Minister Mikhail Mishustin, who was admitted to a hospital but did return to work a few weeks later.

Election impact

The next several days will be critical for President Trump. He is in the high-risk group given he is 74 years old and clinically obese. The risk of hospitalization is elevated and if he becomes incapacitated by illness, the 25th Amendment could be used to transfer power to VP Pence temporarily.

President Trump will have the best medical care in the world and if his symptoms stay relatively mild, he could be able to attend the remaining debates and resume campaigning once he is recovered. Trump's handling over coronavirus pandemic has made him go from a landslide favorite for re-election to a likely one-term president. Markets will be on edge over the next few days to see if the president gets a severe case of the virus.   

Contested election concerns

Following the first presidential debate, President Trump outlined the groundwork to dispute the election. Fears of a contested election and rising doubts that Congress will be able to move forward with a fresh fiscal stimulus package are leaving investors worried that a substantial correction in the S&P 500 and most risky assets could happen. While it is possible this election could get contested in the Supreme Court, it seems unlikely. Wall Street is still optimistic that by January 6th, Congress will certify the results of the Electoral College.

What seems to be a certainty is that we will not see the final results for days until after November 3rd. The media might make projections, but the final results might take a lot longer to ratify the outcome. 

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Polling following first debate

Since the first Presidential debate, Trump has had terrible results at the polls. The first debate was a chaotic mess that has provided the American public little insight for both candidates' plans for the country. Trump’s strategy seemed to knock Biden off his game with countless interruptions. If the election is not a blowout, it seems the White House is preparing for a contested election. Trump said that if he sees “tens of thousands of ballots being manipulated, I can’t go along with that.”

A CNBC national poll showed Biden with a 13-point lead over President Trump.  All the momentum is with Biden as he seems poised to win the popular vote by millions and is making a strong run at winning a few historically red states. A new Quinnipiac University of South Carolina survey showed Trump with a one-point advantage, a state that he won by 14 points against Hillary Clinton in 2016. Alaska appears to be a toss up and that state has been red for 56 years. Another recent poll in Georgia shows a tight presidential race in a state that has steadily been Republican.

Vice-presidential debate

In most presidential elections, the VP debate is somewhat considered to be like the Pro-Bowl for the NFL, entertaining to watch but of little importance, but this one might be important. The upcoming vice-presidential debate between Vice President Pence and Senator Kamala Harris may be a preview for who might be next in line for the presidency in 2024, or possibly sooner if this year’s winner is unable to complete their term. Harris is a solid debater and will likely remain focused on trying to make this election a referendum on the current administration’s handling of the coronavirus. 

Disclaimer: This article is for general information purposes only and does not take into account your personal circumstances. This is not investment advice or an inducement to trade. The information shared is for illustrative purposes only and may not reflect current prices or offers from OANDA. Clients are solely responsible for determining whether trading or a particular transaction is suitable. We recommend you seek independent financial advice and ensure you fully understand the risks involved before trading. Leveraged trading is high risk and not suitable for all. Losses can exceed investments. Opinions are the authors; not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors.

Edward Moya

Senior Market Analyst, The Americas, OANDA

Ed has over two decades of financial market experience and began his career on Wall Street as a forex broker. Ed has worked with some of the top research and news departments in New York and frequently appears on CNBC, Bloomberg TV, Yahoo Finance Live, Fox Business, AusbizTV, and Sky News.

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