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Investors are bracing for a Biden win!


 In the last month when the S&P was down 10%, there were a lot of talks about a potential Risk-off heading into the US Election, with a lot of uncertainties ahead,
uncertainty what really😏!!! well, it turns out that the market is not that uncertain, in fact they are pricing in a Biden win, the polls are showing that the Democrats will lead the USA in the next 4 years, but wait for a minute can we really trust the polls and get burned just like back in 2016? that's fair but I think as traders we should always follow the market participants perception, if they believe that Joe Biden will win we better do that too, except if you're a contrarian which I'm not, and the more Biden's lead widens volatility will continue to decline,


 

But why the market is going up isn't that the Biden plan equal 4 trillion raise in taxes? 

That's true, but we also have to look at the other end of the spectrum which is if there will be a Blue Wave Election (Democrats controlling the House of Representatives and the Senate) expect a massive fiscal stimulus which the markets are starving for,

Bottom line, we are still in the middle of the pandemic and there is a lot of questions about the type of the recovery that we'll have, some analysts thinks it's a V others thinks it's L and Mr Biden has said in the presidential debate it's gonna be a K shape recovery,
so at the moment the markets are blind to fiscal deficit, all that matters is more stimulus and liquidity, and if you want a kindly reminder, remember the ECB back in June when they raised QE by 600B€ beating expectations by 100B€ and the EURUSD went up from 1.12$ to 1.14$ in two days, but isn't more QE means a weaker currency? that's correct but not when we are in the middle of a crisis because in this environment more liquidity means faster recovery, welcome to 2020 dear trader, the year of Masks and cheap money!

for FUN if you're wondering what a k shape recovery means that Mr Biden has referred to, here's a suggestion😂😂


Article by Halim Haddad,

 

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