As Presential election outcome is not clear yet, Wall Street is facing unpredictable business days till presidential election. The 2nd wave of Coronavirus and fading chances of stimulus adding more worries to the share market.
The investors are reluctant to buy before the clear outcome of the elections anddue to which S&P 500 had its biggest drop in one day.
Robert Phipps, director at Per Stirling Capital Management in Austin, Texas said that people are setting up for election night, saving cash to preserve capital, accept lower capital gains, and retain some cash for the growing eventuality of lower prices.
Investors are hopeful for Joe Biden win and they are buying alternative energy shares and cannabis stock which he mentioned in his policy proposal. But some of those stocks performed poor on Monday such as the Invesco Solar ETF share was down by 2.1%
Before Monday, investors were clear on election results and were expecting a clear win but as stocks went down, Vix futures moved up amid the volatility index.
At the moment investors worry that President DolandTrump can win again or an uncertain election result can be expected similar to the presidential election in 2016 when everyone was confident about Hillary Clinton win and outcome was opposite. At the national level, Biden is still in lead but Trump has increased his rating in two important states Georgia and Michigan. An unexpected win by Trump can also increase the S&P 500 index similar to 2016 post-election trading. The margin is getting narrow and it is creating more nervousness among investors.
According to J.P Morgan, the best outcome is Trump marginal victory which can take the S&P 500 index up to 3900. A government with divided powers is good for the economy as per J.P Morgen analyst.
The Poor performance on the S&P 500 on Monday is not only backed by the upcoming elections. It is also due to stalled stimulus package in Washington and an increasing number of Coronavirus cases reported in the last two days.