But a weekend of confusion over Trump’s state of health has not deepened such anxieties. October’s contracts, which cover the polling date, are down 2% on Monday after jumping nearly 5% on Friday.
On the betting market PredictIt, the chance of a Biden win stands at 64%, a tiny drop from a peak of 66% the day before Trump’s positive test was announced. A long-short strategy betting on Biden’s triumph compiled by Nomura Holdings Inc. and Wolfe Research has hardly moved since reaching a record high on Thursday.
Treasuries fell on Monday, with yields on long-maturity bonds rising more than those at the short end. The difference between five- and 30-year rates increased to almost 124 basis points, the widest in more than a month, as investors pared holdings of havens.
Betting And Financial Markets Are Still Projecting A Biden Win
That confidence, combined with a continued economic recovery, will help support equity markets -- and potentially even a rotation into riskier shares, according to Evercore ISI.
“Passage of fiscal package 4 plus a Democratic sweep would be a significant support for value and cyclicals near term,” strategists led by Dennis Debusschere wrote in a note Sunday.
If Trump’s condition deteriorates, investors might start to wonder if the election could be postponed or who would run for the presidency in his place. Yet judging from financial markets’ reaction so far, that remains far from traders’ radar.
“Our baseline – of a risk-supportive macro outlook despite election uncertainty – will not change unless the president’s health unexpectedly takes a worse turn,” the Barclays strategists wrote.
At the same time, there is still no shortage of debate over whether Democratic or Republican policies would be better for investors. While some pundits say the former would raise taxes and tighten regulations in a blow to corporate profits, others point out a Democratic sweep could boost government and consumer spending to add a fresh leg to the risk cycle.
All told, between the disruption wrought by the pandemic and a volatile sitting president, a humdrum transfer of power is seen as providing investor solace.
“We do have sympathy with the idea that a clean election outcome is likely a positive event from here given the “chaos” risk overhanging markets,” strategists at Jefferies wrote in a note.
--With assistance from Anchalee Worrachate and Mark Niquette.
This article was provided by Bloomberg News.