Investors hate uncertainty, but this is ridiculous.
Just 32 days before the election, President Trump stunned an already uneasy Wall Street with news that he and his wife tested positive for COVID-19. His 23-word tweet, posted at 12:54 a.m. Friday, capped a week of unsettling developments on the pandemic, political, and economic fronts.
Yet the stock market took Trump’s announcement in stride. The Dow Jones industrial average ended the day down just 0.5 percent, while the Standard & Poor’s 500 index lost 1 percent and the Nasdaq, full of volatile tech stocks, dropped 2.2 percent.
The S&P 500 managed to eke out its first weekly gain since the end of August — a week in which Trump refused once again to denounce white supremacists or pledge to accept election results if he lost, and more signs of a second coronavirus wave emerged.
There were several reasons for the muted reaction.
Early indications were that the president’s symptoms were mild, allowing him to continue working while in quarantine at the White House. (After the market had closed, his spokeswoman said Trump would work from Walter Reed Medical Center “for the next few days.”) Vice President Mike Pence tested negative, as did former vice president Joe Biden, who is leading Trump in the polls. And stock prices reflect prospects for the economy, which are being driven almost entirely by the pandemic, not the president.
“At this point there is no indication that Trump’s positive COVID status will have a long-term effect on the economy,” said Jill Fopiano, chief executive of O’Brien Wealth Partners in Boston.
Investors quickly turned their attention to another issue: The confusion created by Trump’s illness and a weak national jobs report released Friday could help break the standoff in Congress over the size and scope of a new financial rescue package for businesses and consumers.
“Stimulus talks are helping blunt the negative impact across markets for now,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management in Boston.
House Speaker Nancy Pelosi said Friday she was optimistic about reaching a deal with Treasury Secretary Steven Mnuchin. They’ve already agreed on a new round of $1,200 checks to individuals, while outstanding issues include state and local aid, unemployment insurance, and a child tax credit, according to The Washington Post.
After an initial surge in May and June, the economy is showing signs of slowing down again. On Friday, the Labor Department said employers added 661,000 jobs in September, the third month in a row of diminishing gains and well below analysts' forecasts. The jobless rate fell to 7.9 percent from 8.4 percent.
Temporary layoffs declined last month, but the number of workers without a job for 27 weeks or more rose by 781,000 to 2.4 million. The labor force shrank as people stopped looking for work and were no longer counted in the ranks of unemployed.
The unemployment news comes as other data, including consumer spending and manufacturing output, show the recovery is continuing but without the same vigor it had during the summer.
While Trump’s announcement upended the presidential campaign, investors were already expecting the outcome of the November vote to be chaotic, with delayed results and claims of fraud by the president if he appeared to be losing. That helped drive the Standard & Poor’s 500 index down nearly 4 percent last month, after five straight months of gains. Generally speaking, investors see a Trump win as better for stocks.
The VIX index, which uses options prices to track expectations for market volatility, has been indicating that the final results of the showdown between Trump and Biden wouldn’t be known until mid-December.
How soon Trump can get back on the campaign trail isn’t clear. The president called off all public appearances for now. Also unclear is the impact if Trump can’t campaign for weeks or for the rest of the campaign. Will there be calls to postpone the Nov. 3 vote? Could Pence end up as the president?
“There is no precedent in place if the incumbent nominee were to become incapacitated prior to the election,” Lindsey Bell, chief investment strategist at Ally Invest, said in a note to investors. “Given the lack of clarity on the procedures to move forward, market volatility is likely to persist, if not increase, as the situation unfolds over the next several weeks.”
In other words, investors hate uncertainty, but they won’t be getting a reprieve any time soon.