Stock Markets across US, Europe and Asia fell after the Trump was diagnosed with coronavirus. However, investors should not panic but learn from the virus bouts of UK’s Boris Johnson and Brazil’s Jair Bolsonaro.
Donald Trump’s news of coronavirus diagnosis on Friday came as a shocker for the US market as it fell significantly before recovering nominally. S&P 500 came off its lows trading and closed down just under 1% percent. Markets in Europe and Asia also followed the US’ path as they also saw a decline.
Markets had hardly digested information about Trump’s coronavirus diagnosis when news of him being hospitalized hit. Along came several high-profile Trump Administration casualties – former White House counselor Kellyanne Conway, Trump’s campaign manager Bill Stepien, and his senior adviser Hope Hicks also tested positive.
Investors had hardly digested information about Trump’s coronavirus diagnosis when news of his hospitalization hit stock markets.
A White House coronavirus outbreak taking out key officials in the US administration shook investors belief as markets plunged. However, experts consider it only a momentary bout of panic. A critic went on to the extent of saying that even if vice-president Mike Pence takes over from Trump in a hypothetical situation, it will be good for US economy and the market. According to the US constitution, if president becomes too ill to carry out his duties, the vice president can take over his work.
Trump is seen as a market-friendly president. But, with just 32 days ahead of the US presidential election, Trump’s absence from the campaign has fueled uncertainty. Trump so far has showed mild symptoms of COVID-19 but if his situation worsens, markets can fall further.
Some market critics, however, have other views.
Trump is seen as a market-friendly president. But his absence from the campaign with just 32 days to go for the US presidential election has fueled uncertainty.
No need to panic
Jefferies analyst Sean Darby said that investors in the stock market should not panic because of Trump’s coronavirus diagnosis and his health won’t count much for the US presidential elections and it will happen in time.
“Investors shouldn’t panic over Donald Trump’s being tested positive for coronavirus,” wrote Darby in a report. “It was a big risk (selling shares) since other global leaders have also tested positive, such as Boris Johnson, but the forthcoming US election should not be delayed,” he wrote. Johnson was tested coronavirus positive in May while Bolsonaro was diagnosed with COVID-19 in July. Both were hospitalized and survived.
As stock markets overcome the shock of Trump’s hospitalization, a wave of optimism spreads through analysts.
Mike Pence can do a great job
Matt Gertken, geopolitical strategist at BCA Research, gives insight into a new political equation if Trump fails to contest election due to his poor medical condition. He says Trump’s deputy Pence can be a more stock market-friendly vice-president in Trump’s absence due to hospitalization. He said if Trump’s health comes to a serious point, Pence has a good chance. He said Pence embodies GOP nationalism and economic reflation sans Trump’s unpredictable protectionism.
“VP Pence can be a more market-friendly vice-president in Trump’s absence.”Matt Gertken, geopolitical strategist at BCA Research
“This is a more stock market-friendly version of GOP triumph scenario. The vice-presidential debate now holds importance — with two candidates the US needs to think beyond Trump and Biden,” he said. The US’ only vice-presidential debate is scheduled to be held in Utah on October 7. California senator Kamala Harris is Democrat candidate for VP’s post.
The vice-presidential debate now becomes significant — US voters need to look beyond Trump and Biden.
Stimulus package can help Trump, Republicans
Some experts say that if Trump’s health deteriorates, it will strengthen the possibility of a fiscal stimulus package, an important factor for the job recovery in the US. Possibility of a stimulus package gathered strength when House Speaker Nancy Pelosi asked airlines to hold off on furloughs and layoffs. House Democrats on Thursday symbolically voted for $2.2 trillion package. Republicans can make or mar its fate in a Senate voting. Jeff Buhbinder, equity strategist at the LPL Financial, said in a note, “It will be interesting to know what impact Trump’s diagnosis has on stimulus negotiations, the speed of re-openings, and pace of jobs recovery.”
Watch: JP Morgan’s David Kelly on market impact from Trump’s Covid-19 Diagnosis
Michael Pompian, an expert on behavioral finance at Sunpointe Investment, said that people shouldn’t change their investment tactics based on changed political equations because these things do not matter in a long run. “Many investors were skeptical about investment before Trump’s triumph in 2016 election, but markets rallied after he was elected the president,” he was quoted as saying.
If Trump’s health deteriorates, it will strengthen the possibility of a fiscal stimulus package, an important factor for the job recovery in the US.
Julian Emanuel, head of equities and derivatives at BTIG, says market has a close watch on Trump and changes in his health will play a key role in the surge of market. “People are going to notice how Trump communicates, either physically of through tweets, with public in next few weeks. His activities in next few days will tell us the severity of market crisis.”
Trump’s activities in next few days, physically or through tweets, will determine the severity of market crisis.