The markets today, Friday, look to start very deeply in the red with nearly all major indicators driven down, some of them quite sharply, by the news that U. S. President Donald Trump and First Lady Melania Trump have tested positive for the coronavirus.
In an unintended irony, the President will shift to working from home as so many government and company employees have done.
The net economic effect will take time to play out until we see whether there is any impact on the fragile recovery.
The net political effect will take some days to play out and in an extreme – but very unlikely – scenario – Vice President Mike Pence would assume the President’s responsibilities. In the short term, challenger and former Vice President Joe Biden may gain some traction and score some bonus points on the campaign trail. “From an election perspective, this sees the focus shift back onto Biden’s favoured topic of Trump’s questionable record dealing with Covid-19,” suggests Joshua Mahony, Senior Market Analyst at IG Group in London, England.
However, the net market effect started playing out overnight with the downward pressure overnight on indicators.
It can be expected that market volatility will increase and that many stock categories will drop with the news. “(This) news has come as a shock to markets, with risk-off sentiment immediately taking hold to the detriment of stocks,” Mahony says.
Some stock categories could enjoy a positive effect, a possibility that may crystallize as the trading day unfolds. It might become useful to observe the impact of the news on vaccine and vaccine-related stocks such as AstraZeneca, Inovio, Johnson & Johnson, Pfizer and others.
It might also become useful to watch for any effect on related companies such as pharmaceutical and medical distributor McKesson Corp.
It can also be expected large amounts of money will be shifted to safe havens such as United States Treasuries.
It would be reasonable to expect that markets will recover from today’s news if the President and First Lady recover quickly. Mahony suggests that Republicans will hope that Trump gets a boost from voters rallying around the President.