The President's Health and the Market
Things that matter and things that don’t
Thoughts
The President catching COVID-19 is certainly a shocking development. But the next question would be, is it really all that surprising?
Now, I don’t mean that in the sense of the administration’s message about the virus and general attitude about the seriousness of it. What I really mean is, if you are trying to stop something that is basically like trying to stop air, is it really that surprising when almost anyone eventually catches it despite their effort (or lack of effort) to stay safe?
It’s hard to remember sometimes that we’ve been in a global pandemic that started traveling around the world in January (if not sooner). Unless someone has somehow cut off all possible contact with other humans, which almost no one has or really theoretically could do without a well-stocked bunker, then catching the virus is certainly a possibility.
I don’t doubt that the President took precautions. I also don’t doubt that he could have taken more precautions. But, even if he had, he still could have caught it. That goes for anyone, including the Vice President, both members of the Democratic ticket and anyone else in the current or potential line of succession.
The next question to ask, since the current situation and it’s ongoing development obviously matters in many ways, is does it matter to the stock market? I don’t mean to say this to be callous but, whenever things happen in the world good or bad, people usually want to know how it will affect their investments. That includes life and death.
As of right now, I don’t see the current scenario leading to any sort of major crash beyond potentially a 5-10% drop. After what we saw in March, that shouldn’t be too difficult to mentally handle.
In fact, to the extent the uncertainty of the situation lessens and the future path of the election, with either winning result, becomes more certain, I see the market getting a boost from the clearer picture.
I believe this because I believe the main driver of the market will be the expectation of the coming four years of administrative influence. So, to the extent one party becomes more likely to win and the result isn’t up in the air, the market will be less volatile due to the increased likelihood of one side winning - no matter which side.
It’s the same reason market futures temporarily crashed on election night 2016. That wasn’t because Trump won and people were scared to death (well, maybe some people…I mean the market is a big big pool of diverse opinions). It fell because there was a massive overnight rotation in investments toward strategies better suited for the then unexpected win of the Republican Party.
So, if my opinion right now is that the market will be fine, what do I think will cause the market to fall? It’s all about sharp changes in expectations and uncertainty. So, here is my general guess at shoes that could drop next and cause more market turmoil from least impactful to most impactful:
President Trump and everyone else gets better (market probably flat because that may mean uncertainty to who wins or contested results)
The President passes away (again, I don’t mean this to be callous but, given how I believe these events will play out with this scenario given more certainty to a democratic win, I don’t believe the markets go down significantly because of this - Presidents have died many times in history)
The Vice President catches the coronavirus (this I think is more impactful to uncertainty than even the President passing away because we start to enter relatively uncharted territory historically)
One or both members of the Democratic ticket catch coronavirus (this really ramps up the uncertainty because now we really enter uncharted who-will-potentially-govern territory)
All the above plus members down the line of succession catch coronavirus (I think this speaks for itself as it’s just a further extreme of the aforementioned scenarios)
Make no mistake about it. The current situation is on the verge of unprecedented territory. Right now, I don’t think we’ve reached the tipping point into the market caring all that much but a few things could quickly push it there.
At the end of the day, while I just spent a bunch of time discussing the impact to the market, there are things much more important than money. I truly wish all those currently sick (and those who still may get sick), here and around the world, a full and healthy recovery.
Metrics
The unemployment rate fell but remains higher than almost any post-WWII period
The economy added more jobs in September but the trend continues to slow
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