Nobody Likes a Sore Loser
Economy
October 1, 2020
On Sept 23, 2020, when Trump was asked whether he would commit to a peaceful transition of power, he refused to answer. So what does this mean? Well, if Trump loses, he could possibly challenge the results… This would bring the final decision to the Supreme Court.
- History has shown us that a delay in election results negatively impacts stock markets. This time might not be so different…
How did we get here? With COVID still upon us, the US has turned to voting by mail for the US 2020 presidential elections. At the start of September, Trump argued that voting by mail will lead to voter fraud and skew the results.
(Catchup: How will a Trump or Biden victory impact stock markets?)
What’s the potential impact on stock markets?
In the 2000 election between Al Gore and Bush, results were delayed for nearly 5 weeks until a recount issue was resolved in court. Between the election day (Nov. 7, 2000) and the day the Supreme Court gave their ruling (Dec. 9, 2000), the S&P 500 fell 8.4%.
Similar to the 2000 election, stock markets will likely see larger losses if results are delayed from election results. Voting by mail could further delay results which creates more uncertainty in the process.
- Best case scenario… No delays in counting votes and no candidates challenge the results. Here, the stock market experiences mild price changes.
- Worst case scenario…. The vote count is delayed and the final ruling goes to court… Here, the stock market could extend losses until a winner is chosen.
Election periods are known to cause significant price swings in the market. In the 2016 election, the S&P 500 fell over 5% once a winner was selected only to recover their losses within a month. Investors, prepare yourself for the market volatility to come.
(Catchup: How to prepare yourself for more market volatility?)
