Disorderly debate clash w/ quarter end

The debate was a mess but Joe Biden likely improved his standing. For markets though, the question of who will win the election remains the wrong one. The risk is that we won't get a clear winner, or that the losing side (or his supporters) won't accept the result. Indices sold off after the debate into early Europe on the rationale that Trump still has a fighting chance for victory. But a fresh rallied ensued on emerging hopes as House speaker Pelosi moved closer to a vote on a Democrats-backed $2.2 trillion proposal. 

Given the polls, Joe Biden should be a prohibitive favourite but a series of voting surprises have shaken confidence in pollsters. That uncertainty is going to linger right up until the vote but in Tuesdays' debate, Biden likely removed some linger doubts from the few undecided voters and he took another step towards the Presidency.

The inevitable response to polling leads is that Hillary Clinton was also ahead. That's true but she wasn't this far ahead. The RealClearPolitics average puts Biden at 49.4% and Trump at 43.3%. A month ahead of the election in 2016, Clinton was up by 1 point. In 2016 there were also far more undecided voters than today. Swing state polls are less reliable but there are enough to draw the same conclusion.

Ahead of the debate, the attack against Biden has been that his mental acuity is in steep decline. Watching it, that was clearly not the case. He's not as sharp as he was a decade ago, but he handled the non-stop barrage of interruptions, conspiracy theories, lies and insults with some deftness and while he stumbled on the odd word, he was far more coherent than his detractors would like you to believe.

Betting markets showed an uptick in Biden's odds after the debate to put him around 60/40. The odds in the Senate are tighter and the result there will determine if Democrats have any real power.

As for markets, it's not going to be as simple as some would portray. Biden has promised to raise the corporate tax rate but if the market was truly fearful of that, equities would crater as Biden climbs. The reality is that Congress would need to hike rates and there are far too many congressmen who have been bought off on both sides to let that happen.

In the shorter term, policy is a secondary concern and the real risk is the election itself. It's extraordinarily difficult to handicap the odds of turmoil following the vote but Trump once again sowed doubt about the transfer of power in the debate and raised more questions about whether he will accept the outcome of the vote. Similar comments weighed on markets earlier this month.

That talk from Trump won't go away and could have repercussions way beyond the election. Even if he's thrown out by both parties he will still hold an incredible amount of power among his die-hard supporters.

There will continue to be opportunities  in trading around this trainwreck but the main takeaway from here is that the temperature is going to continue to rise and that will mean a steady stream of investors to the sidelines or safe havens in the month ahead.