Banks, investors pivot towards Biden win after Trump tests positive for COVID

In this news, we discuss the Banks, investors pivot towards Biden win after Trump tests positive for COVID.

NEW YORK (Reuters) – Global banks and investors said they were stepping up preparations for a victory for Democratic presidential candidate Joe Biden after his rival Republican President Donald Trump revealed he had been tested positive for COVID-19 on Friday morning.

The developments were the latest dramatic turn in an extraordinary election year where many banks and investors were not planning a clear win on November 3 with global market panic expected to ensue, Reuters reported on Wednesday.

They were quickly shifting gears on Friday believing that Trump’s positive outcome would deal a blow to his campaign and reduce the overall chances of a contested election result.

“Trump contracting the coronavirus will increase institutional money readiness for a Democratic White House and all the tax, business and budgetary implications that go with it,” wrote James McDonald, CEO of Los Angeles-based fund manager Hercules Investments, in a note.

“We expect institutional investors to start reducing the risk of their portfolios and increasing hedges in anticipation of market volatility.”

Oil prices fell on the news and stocks saw an initial sell off in a volatile morning trading session.

Big banks have run simulations to make sure they can cope with surging market, liquidity and credit risks in the event of contested elections or even a constitutional crisis.

A senior capital markets banker said on Friday that his institution was still stress testing all scenarios, but had steered the simulations more towards a clear victory for Biden and what that would imply in terms of volatility and price. hedging strategies.

“It increases Biden’s chances and reduces the risk of prosecution and recriminations,” another banker said.

The bankers refused to be identified because the internal plans are private.

Biden, who tested negative for COVID-19 on Friday, has a nine-point lead over Trump after their first combative debate on Tuesday, according to a Reuters / Ipsos poll released Thursday.

The White House said on Friday that the president was showing mild symptoms and was self-isolating with First Lady Melania Trump who also tested positive. His campaign said it was picking up or postponing several planned events. It was not clear whether the next televised election debate scheduled for October 15 would continue.

One of the bankers added that Trump’s predicament would shift electoral focus back to the pandemic and away from the U.S. economy, a signing policy for Trump on which he had led Biden in approval ratings. Another blow to the president, job growth in the United States slowed more than expected in September, data showed Friday.

“He will waste precious time campaigning and that brings the issue he has dismissed from the front and center,” said another major investor. “He tried to put the COVID topic in the rearview mirror and now he’s coming back as topic number one.”

Even as the risk of contested elections decreases, some investors have said they still expect increased volatility.

“I don’t think volatility suddenly goes away right after an election,” wrote Jason Brady, president and CEO of Thornburg Investment Management, a New Mexico-based asset manager with $ 41 billion in assets. clients.

“The bulls and bears will be with us in December and January, as the second-order effects of the transfer of power with a new administration – or adjustments to an existing administration – will be taken into account.”

Written by Michelle Price; Additional reports by Svea Herbst-Bayliss; edited by Chizu Nomiyama

Original © Thomson Reuters

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