LONDON (Reuters) – Just about the only market consensus all year on next month’s U.S. election was that it would be volatile around the vote – but even that’s turning upside down three weeks before polling.
A narrow and disputed election result has been one of the main investor fears for months. Bank of America’s October global fund manager survey still had 60% of its respondents expecting the result to be contested – and three quarters said it was the outcome likely to cause most market disruption.
But with Democratic challenger Joe Biden’s consistent opinion poll lead since May widening into election day, bookmakers’ odds on a clearcut outcome and Democrat clean sweep of the White House and both Houses of Congress are narrowing.
Investment banks and asset managers, who have for decades argued markets would baulk at tax and spend policies and prefer congressional gridlock to curb any excesses, are now positively embracing the likelihood of a clean sweep for a Democratic Party expected to spend big and also raise wealth and corporate taxes.
With less than a month to go, Wall Street stocks are racing to record highs again and long-elevated implied volatilities of the S&P500 benchmark – the VIX ‘fear gauge’ and its November and December futures contracts – are draining to 6-week lows.
Opinion polls now put Biden’s lead over incumbent Donald Trump in double digits, almost twice September levels. Bookmakers in Europe put Trump as the 7/4 outsider, his longest odds of the campaign, and the Democrats are now favorite to take to take key swing states – Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin.
Online market PredictIt puts the chance of a Biden White House as high as 66% and a Democrat clean sweep at 59%.
Far from running scared, the investment world