with the democrat Joe Biden in the White House, that possible outcome would lead to a divided governmenta result that is considered broadly favorable for long-term markets.
However, one Democrats’ surprise win could turn markets aroundbringing out the concern about technology sector regulation and budget spendingwhat could trigger an inflation already high, according to market participants.
Analysts say that a calendar full of highly anticipated macroeconomic events, such as the Federal Reserve meeting last week and the data on US consumer prices At the end of the week, have left operators less focused on voting than would be usual.
Given the investor transactions in connection with elections are relatively rare, “Any surprise would be exacerbated due to the weakness of the markets and the relatively high volatility scenario that we are seeing right now,” said Chris Murphyco-head of derivatives strategy at Susquehanna International Group, in dialogue with Reuters.
According to Tom Borgen-Davishead of equity research at options market-making firm Optiver, options positioning involved a 1.5% decline in the S&P 500 the day after the vote in case the Democrats get a better-than-expected result.
A “big Democrat win could be seen as a negative for the tech sectoras they are more likely to introduce regulations in the industry, compared to Republicans,” Borgen-Davis said.
However, the Options traders don’t seem prepared for big moves. For example, open put options on Nasdaq 100 PowerShares QQQ Trust options, normally used for defensive positioning, outnumber purchase optionsnormally used for bullish bets, by a ratio of 1.4 to 1, one of the smallest margins since mid-June, according to data from TradeAlert.
In the meantime, the Cboe volatility indexknown as the Wall Street fear thermometer fell on Monday to close in a minimum of almost two months. The SPX rose 0.96% but is still down 20% on the year.
The strategists of Morgan Stanley, among them mike wilsonThey wrote on Monday that a Democratic victory could push up Treasury yields and strengthen the dollarreflecting the view that a higher fiscal spending could exacerbate inflation and force the Fed to raise rates more than anticipated.
“Markets could allocate a greater probability of greater fiscal expansionwith Congress and the Fed effectively pulling in opposite directions on inflation,” Morgan Stanley analysts wrote.
Secondly, a clean victory by the Republicans could increase the chances of a spending freezewhat would boost treasuries Y would support the most recent stock rebound.
Source: Ambito
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