The equity, debt and currency markets face days of volatility as investors’ expectations for a decisive victory in the U.S. election all but disappeared this morning.
The expected “Blue Wave” that was to propel Democratic presidential candidate Joe Biden into the White House did not happen, according to the Globe & Mail.
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Reading the polls, which suggested a Democratic sweep of the White House and Congress, investors bet that a Democratic victory would trigger another round of stimulus for the U.S. economy, repairing some of the damage inflected by the pandemic’s second wave.
A decisive Democratic victory would have been bullish for equities, but the likelihood of a contested outcome saw investors pulling back their trades. Futures on the S&P 500 sank 0.5 per cent on Wednesday morning, ahead of the U.S. market opening, reversing an earlier advance. Yields on U.S. 10-year Treasuries dropped (yields and prices go in opposite directions) as investors took refuge in debt, and the dollar rose.
In a note, RBC Capital markets said “The fear of a contested outcome has not really materialized in risk off yet (selling pressure), but it does unfortunately seem more likely in the days ahead.”
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