Should Investors Prepare for the Likelihood of Post-Election Unrest?

The markets today, Wednesday, have a mixed outlook before opening. Major North American indicators are moving back and forth between green and red at time of writing, reflecting several factors including uneasiness over stimulus negotiations in Washington. These indicators can change during the runup to the opening bell and at any time afterwards – as has happened in recent days.

European indicators are firmly in the red at time of writing, reflecting several factors including uncertainties over the final resolution of BREXIT as well as fears of renewed lockdowns in some areas of the United Kingdom.

Whatever happens next in Washington, it is reasonable to believe that the election results will be accompanied by ill-feeling, and possibly worse. The extent to which that has an impact on markets cannot be reasonably predicted at this time and very much remains to be seen.

Although no one really wants to contemplate the likelihood of post-election unrest, global risk consultancy Control Risks suggests the possibility. Given what it terms ‘the likelihood of prolonged social unrest’, global companies and investors operating in the United States are moving to protect employees and assets, says Control Risks analyst Jonathan Wood.

The strategies include developing threat monitoring programs, heightened security at retail and corporate locations, and incorporating social risk factors into crisis management plans. Organizations are adapting to an unprecedented and rapidly evolving American operating environment, Wood says.

Notwithstanding the possibility of unrest, markets and investors may not get the customary morning-after clarity of results, according to the Control Risks analysis. The increase in postal voting and the potential for recounts and other legal challenges mean that final election results are likely to be delayed for days to weeks after election day. During that period, protests aimed at pressuring state political and election officials appear likely, particularly in states where the election result is close or contested

The potential form of unrest varies depending on the election winner in Control Risks’ analysis. A contested election resulting in a victory for former Vice President Joe Biden would be less likely to trigger mass demonstrations but would more likely lead militant anti-government activists to protest out of fear of the implications of a Democratic administration. The threat of targeted political violence from right-wing extremists would persist.

By comparison, a contested election leading to victory for incumbent President Donald Trump could trigger mass demonstrations in major American cities (and perhaps in foreign countries) similar to those in November 2016. Such demonstrations would be largely peaceful but could deteriorate into violent unrest in some cities.

Whether Control Risks and its analysts are overstating the potential impact will become clearer on November 03 and the days immediately afterwards. One hopes that these predictions do not crystallize but if large scale unrest does occur it will not be good for the markets.

Related: Should Investors Take Washington Follies Into Account in Investment Decisions?