Wall Street is not overly worried Trump can overturn election

By David Randall NEW YORK (Reuters) - U.S.

Reuters November 12, 2020 00:05:41 IST
Wall Street is not overly worried Trump can overturn election

Wall Street is not overly worried Trump can overturn election

By David Randall

NEW YORK (Reuters) - U.S. stock investors have expressed concerns that President Donald Trump's effort to contest the U.S. election without evidence could roil markets temporarily, but few appeared seriously worried that challenges to the results will succeed.

Ahead of the election, analysts had said a key risk to financial market stability was the possibility that Trump would contest the result if he lost, or refuse to leave office.

Still, even as that scenario has been playing out, the benchmark S&P 500 stock index is up approximately 6% since Election Day. Sectors that were expected to outperform under President-elect Joe Biden are surging, such as cannabis stocks and clean energy. Private prison stocks have dropped by 8% or more, reflecting Biden's proposal to end federal use of private facilities.

"The market believes that the Biden victory is unlikely to be overturned," said Maneesh Deshpande, head of equity derivatives at Barclays.

He said the market's performance is consistent with Wall Street's preference for a clear winner rather than a drawn-out legal fight similar to the 2000 election. Then, the outcome was up in the air for five weeks until the U.S. Supreme Court decided Florida must end its recount, handing the election to George W. Bush.

That year, the S&P 500 fell 7.8% between Election Day and year end, according to data from CFRA Research, as post-election turmoil fed the volatility around the bursting of the late 1990s tech bubble.

Despite the market's performance, some remain concerned that Trump and several U.S. Senate Republicans are still alleging without evidence Biden did not legitimately win.

Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets, in a note Monday said she worried about how the actual transfer of power to the President-elect work and "When (and WILL) Republicans and Trump concede?"

"With the markets exuberant today I worry about the coming days, weeks and months," Silverman said.

Overall, Refinitiv data show that options markets are pricing in a jump in volatility in January consistent with a handoff of power to a Biden Administration, and are not reflecting a spike over the next few weeks that a drawn-out election court contest would bring.

Market expectations of volatility are higher in late December to early January, around when Georgia's Jan. 5 run-off election for its two U.S. Senate seats, which will decide whether Biden's Democrats can gain majority control of that chamber.

Moody's Investors Service, in a note on Tuesday, warned that ongoing legal challenges to Biden's projected victory could unsettle markets and stir social tensions, which could have a material impact on the U.S. recovery.

Still, Moody's said its assumption was that "U.S. institutions will eventually resolve these issues without causing any meaningful, enduring credit impact."

Biden cleared the threshold of 270 Electoral College votes needed to win the presidency on Saturday after four days of ballot counting with wins in battleground states including Pennsylvania, Wisconsin, and Michigan. Biden leads in two of the four states yet to be called, and overall is ahead by more than 4.4 million ballots in the popular vote with more ballots in solidly-Democratic states such as California yet to be counted.

Trump has yet to concede, breaking with longstanding tradition, and has so far blocked millions of dollars of funding to Biden's transition, and hindered its ability to meet with officials at intelligence agencies and other departments.

Those efforts are unlikely to affect the market's positioning for a Biden presidency, said Lamar Villere, a portfolio manager at Villere & Co.

"I don't think Trump conceding has any impact on what the market thinks is going to happen," said Villere, adding there is "nothing that anyone can say" to prevent Biden from assuming the presidency in January.

Brad McMillan, chief investment officer at Commonwealth Financial Network, said investors are less worried about Trump's ability to block the election results than about the chance that Georgia voters will hand control of the Senate to Biden's Democrats on Jan. 5.

"The story of the start of November was everyone feeling good that the world wasn't ending," McMillan said. "The story for the rest of the month is likely to be how investors start worrying again."

(Reporting by David Randall. Additional reporting by Ross Kerber and April Joyner; editing by Megan Davies and David Gregorio)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.