S&P 500 Futures: Stocks to surge on Trump's discharge hopes, four reasons why a crash may follow

President Trump's doctors said he could be discharged from the hospital on Monday.
Stocks are set to rise in response to his improving condition.
A larger collapse in shares cannot be ruled out if Trump remains in the hospital.

Yohay Elam FXStreet

"The president has continued to improve" – the message from President Donald Trump's physician on Sunday, is taken with a grain of salt after the confusion caused on Saturday due to contradicting statements from the White House. However, the announcement that Trump could be discharged on Monday has been making headlines around the world.

Hopes that the president's COVID-19 episode could be short-lived provide some relief for markets, which fell on Friday after Trump tweeted out his positive coronavirus test. The president, 74-years old and overweight, is leading the world's most powerful country and is trailing behind in the polls. The dramatic turn in an already turbulent campaign has shocked the world and investors.

While S&P 500 futures may advance in Asia and in Europe, the move in American equities depends on Trump indeed leaving the Walter Reed hospital and showing up with his usual energy in the White House. There are reasons to doubt that will happen.

Four reasons to doubt the instant hopes

First, the doctors seemed evasive when talking about Trump's lung scans. Has he developed pneumonia? Hopefully, the answer is no, but the lack of transparency is worrying.

Second, Dr. Sean Conley, the president's doctor, finally acknowledged that Trump received oxygen – on Saturday he only insisted that the president is not on oxygen right now. That also casts doubts about his condition. Late on Saturday, Trump released a video of himself from the hospital to lay these concerns to rest. Another spell of oxygen cannot be ruled out.

Third, Trump is receiving significant medications, including dexamethasone, a steroid that the Center for Disease Control (CDC) recommends administering to patients with "severe and critical COVID-19." While medics may be trying to throw everything at Patient Number One, the usage of steroids – which also suppress fever – can be worrying.

Fourth, according to Dr. Conley, days 7-10 are the most critical ones and Trump could only be in days 5-8 – depending on when he was infected. He was initially taken to the hospital on Friday due to an "abundance of precaution" and keeping him a few more days would seem only seem to be the minimum.

Conclusion

Markets tend to get ahead of themselves and could rise in the hopes that Trump leaves the hospital. However, there are reasons to be cautious on the president's condition, and if he stays for a few more days, it would disappoint investors and send stocks down.

More 2020 Elections: How stocks, gold, dollar could move in four scenarios, nightmare one included

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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