US stocks are drifting lower ahead of a momentous week full of potential flashpoints, but other markets are already moving more sharply, including a rise for oil prices and drops for Treasury yields.
The S&P 500 was slipping 0.2 per cent in afternoon trading, but remains near its record set last month. The Dow Jones was down 210 points, or 0.5 per cent and the Nasdaq composite was 0.1 per cent lower. The Australian sharemarket is set to slide, with 33 points, or 0.4 per cent, at the open. The ASX added 0.6 per cent on Monday.
There are a number of nig events for investors to grapple with this week. Credit: Reuters
Marriott International fell 1.6 per cent after reporting weaker profit for the latest quarter than analysts expected. But Fox climbed 3.8 per cent after reporting a stronger profit than expected. That was despite increases in some costs, including for newsgathering at Fox News to cover this election cycle.
Election Day will arrive on Tuesday in the US, but its result may not be known for some time as officials count all the votes. That’s raised fears about the possibility of sharp swings around the world because markets infamously hate uncertainty.
History may be less foreboding. The broad US stock market has historically gone on to rise regardless of which party wins the White House. And in 2020, US stocks climbed immediately after Election Day and kept going even after former President Donald Trump refused to concede and challenged the results, creating lots of uncertainty. A large part of that rally was due to excitement about the potential for a vaccine for COVID-19, which had just shut down the global economy.
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“Bottom line – the US election is incredibly important, but the process is likely to be incredibly noisy,” according to Michael Zezas, a strategist at Morgan Stanley.
For markets, Zezas also points to how prices may have already moved ahead of expected outcomes from the election. A win for Trump this election could mean US tariffs on Mexican imports, for example, which could hurt the value of the Mexican peso. But the peso has already fallen against the US dollar in recent months, which could limit further moves if a Trump win were to actually happen.
A Trump victory would also be less of a surprise to markets this time around than in 2016, when Treasury yields soared amid expectations for tax cuts that could fuel a stronger US economy or further inflate the nation’s debt. Treasury yields have already climbed in recent weeks, in part due to rising expectations in some market corners for a Trump win, along with a spate of reports showing the US economy has remained stronger than feared.
