The markets seem to be saying they want Trump...
We all know that Trump can be polarizing politically, but it appears he also is pretty polarizing when it comes to financial markets as well.
There has been a very interesting trend over the last several months relating to Trump's re-election odds and stock market returns.
This metric is also interesting as it relates to bitcoin as well because bitcoin has been so highly correlated to stocks over that time as well.
Specifically, when the odds improve of Trump being re-elected, the stock market (and bitcoin) tend to do well.
When those odds drop, the stock market (and bitcoin) don't do so well...
Don't believe me?
Check it out:
This is the betting markets displaying the odds of a Donald Trump re-election vs. the S&P 500 stock market returns.
As you can see, apart from a brief stretch in the middle of the chart, the two have been highly correlated.
When Trump's odds of winning go up, so do stocks.
Why is this happening?
Well, it could be happening for several reasons actually.
Number one, and this has nothing to do with Trump or Biden as individuals, but in general Trump is the more favorable candidate for corporations.
Biden has mentioned several times that he will raise taxes on corporations and the wealthy.
Not what the stock market wants to hear.
Trump has been more lenient on corporations during his 4 year tenure than most project Biden would be.
Another reason could have nothing do with Trump per say, but more to do with the coronavirus.
The stock market has performed well when the coronavirus looks like it is dying down, or when things look like they are improving overall, and thus do so Trump's election odds.
Check it out:
My guess is that the correlations have something to do with a combination of those two things as well as a couple others.
The interesting thing will be what happens to stocks if Biden wins the election like many of the polls are showing is likely at this point.
Perhaps an initial decline followed by a rally as stimulus probably flows like honey?
Either way, that all probably depends on how stocks react heading into the election, IE if they are weak they may not go down much more, if they are strong they go down a lot.
Interesting times we are in folks!
Stay informed my friends.
Posted Using LeoFinance