Julius Baer: Too Close to Call
According to Julius Baer’s Asia head of research Mark Matthews, the election will be very close despite the wave of mainstream media headlines and popular polling data favoring Biden. Elsewhere, Trump was named as the more likely winner based on polls that made more meticulous adjustments to factors such as reflection of «shy Trump voters», new party member registrations since 201 and even the stock market.
«Historically, if it rose in the three months prior to the election, that was almost always a sign the incumbent was going to be re-elected,» Matthews shared. «There were only three out of the past 23 elections when that was not the case.»
Challenged Outcome: Volatility After a Week
Matthews believes that a post-election rally will occur across scenarios including a Democratic sweep as well a Democratic or Republic win with a split Congress. What will be the major driver of volatility will be the case of a challenge outcome and duration of the delay.
«There is also the possibility results won’t be known on the day itself, because mail-in ballots need to be counted, or results in one or more states are so close that re-counts have to be done,» Matthews explained.
«The market would probably take this in stride if the results were made known in less than a week. But any longer than that, and it would likely fall on the uncertainty.
Hedging: Much Ado About Nothing
According to the bank, hedging through futures has become too expensive while gold is increasingly behaving like a risk asset rather than a safe haven.
«So there is really nothing you can do except reduce your risk exposure if you really are worried about the result,» Matthews added. «Probably the best thing to do is just ride it through. There has never been a bear market started by an election.»
