The Tribune

ACTIVTRADES WEEKLY

By CARLO ALBERTO DE CASA

www.activtrades.bs

THE US presidential election seemed like a thriller with multiple possibilities for a conclusion. In the end, the originally predicted outcome has proven accurate, albeit with a smaller margin.

The initial forecasts were clearly in favour of Joe Biden, who was expected to win with a large majority. Things appeared to be turning out quite differently, especially in the early stages after the polls had closed, when a surprising victory for Donald Trump seemed possible. But this initial surge didn’t take into account mail-in votes, which largely favoured the Democratic candidate. Indeed, due to coronavirus, the Democrats were insistent on mail-in votes being an option with a significant proportion of their vote coming via this route, the validity of which is now being contested by Trump.

The eyes of the world keenly followed developments; particularly in the key swing states of Michigan, Georgia, Arizona, Nevada, Pennsylvania and North Carolina. And in less than 24 hours, when the huge volume of mail-in votes was included, the verdict started to turn decidedly in favour of Biden who emerged as the presumptive winner of the presidential race.

For betting lovers, it is interesting to note Biden was available at 1.50 in the days before the election. Or in other words, for each dollar bet on the Democrat, you would get $1.50 back if he won. In the evening after the election this jumped up to 4.50, giving him less than a 25 percent chance of winning.

The financial markets were nervous, seeing various scenarios: a large victory for Biden; a narrow victory for one of the two candidates; or a deadlock with legal battles ensuing.

With Biden’s narrow win the last scenario is still a possibility as Donald Trump is making desperate attempts to contest victory for Biden via legal challenges. This seems unlikely at this stage, as Trump would probably need to reverse the result of more than one state.

It is noteworthy that Trump has had one success by not conceding the Senate to the Democrats.

What does it all mean for financial markets?

Overall, stock markets have reacted positively with a significant rebound. Dow Jones again reached 28,000 points, while S&P climbed to 3,500 or higher than February’s pre-crisis level.

Most commodities ended last week in the green, including silver, gold and oil. The decline of the greenback has boosted stocks and commodities recovery, but markets anxiously wanted the election to be over.

The risk now is that despite a verdict, the dispute over the result could rumble on into multiple tribunals, dragging the process out indefinitely.

Technically, markets don’t like uncertainty, nor protracted political disputes. If this occurs it will generate more uncertainty and further questions about the entire US electoral system.