What are the threats to markets from the U.S. presidential election?

By 20/07/2020News
Morning Stock News

Gold   1808,85

EURUSD   1,1441
( +0,12%)

DJIA  26397,50

OIL.WTI  40,45

DAX   12963,78

Everyone has long been tired of 2 topics: coronavirus and trade war between the United States and China. There is a new topic on the agenda, which will become more and more relevant every week. We’re talking about the U.S. presidential election in November 2020. And this is a very painful topic for the markets.



Why? According to recent polls, U.S. Democratic Party candidate Joe Biden is steadily ahead of Donald Trump. Critics may recall much of the current American president. But most people are annoyed by his failed policy towards the coronavirus epidemic.
What’s Donald Trump good at? He’s only effectively dealing with one problem – stock market growth. And both the supporters of the incumbent president and his opponents agree with that. It’s true that the U.S. hasn’t had an entrepreneurial politician in power for years. Who is not engaged in bureaucracy, but makes concrete and quick steps to improve the competitiveness of the American economy.
And that is a huge risk. If Donald Trump loses the election, there is no doubt that the topic of the stock market will move to the second, and maybe even to the third plan. Once again, endless investigations will begin into Russia’s interference in the 2016 election. There will be a debate about the fact that every American should have full medical insurance. The question of emigrants and the wall on the border with Mexico will be raised again, etc., etc.
What do markets do when attention is switched to something else? That’s right! They start to fall. So it’s worth putting this risk in the mid-term portfolio formation.

Japanese Yen

It’s been a long time since we’ve written about Japanese currency. Recently, it has been trading in a fairly narrow corridor. This means it does not arouse any interest among traders. At the same time, there are 2 points that are worth paying attention to.
1. Stock markets rose again very high after the spring fall. Even a small correction will be accompanied by a sharp decline of the dollar/yen pair. Moreover, the pair refuses to rise on the rise of stock markets (this is a very strong signal).
2. The American dollar itself keeps getting cheaper against all assets. At any moment, Japanese investors may decide that the dollar is too expensive against the Japanese yen.

And the end of the problem is that the chart has long been below the 200-day moving average. That is, in case of further decline of the pair, large hedge funds may join the game, which will put on the continuation of the trend.

What’s waiting for us today?

03:30 Decision of the People’s Bank of China on interest rate
08:00 Producer price index in Germany for June
17:10 Speech by a member of the Monetary Policy Committee of the Bank of England Haldane

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.