- Investors have digested spiking odds of a Joe Biden win and the likelihood of a blue wave The possibility of a contested election remains a wild card.
Where it stands: The S&P is on pace for the worst week since June, despite yesterday’s partial rebound.
- For the Dow, it’s set to be the worst week since March.
What's new: Skyrocketing coronavirus cases in the U.S. and Europe are "competing for investors' attention at the same time as we lead up to the election," says Michael Reynolds, investment strategy officer at Glenmede.
- The threat of further lockdowns (which are already happening across Europe) alongside a worsening outbreak could dent corporate earnings and the fragile economic recovery.
What they're saying: "The market priced in absolute perfection. Any type of sneeze, any type of cough and everyone gets scared," Gene Goldman, chief investment officer at Cetera Investment Management, tells Axios.
Between the lines: The VIX index, which measures market volatility, touched the highest level since June, though it's nowhere near the elevated levels seen earlier this year.
- Volatility "tends to spike ahead of elections and relative calm returns shortly after the election is decided," Nasdaq's chief economist Phil Mackintosh said yesterday — except in the case of 2000 (the last contested election) and in 2008 (during the financial crisis).
- But VIX futures indicate investors are betting that election volatility lasts for an extended stretch, Mackintosh notes.
Yes, but: With the exception of 1988, the S&P 500 has seen a positive return from the Tuesday before the election to Election Day ahead of the last 12 presidential runoffs, according to data from Goldman Sachs.
- The S&P 500 is on track to buck that trend this election year (but there’s still time for the index to fully recover losses).
