• President Donald Trump's contraction of COVID-19 raises questions about fiscal stimulus talks.
  • Sympathy could strengthen the incumbent's position, narrowing his gap with rival Biden and tightening the race. 
  • Questions about the Vice President's Pence's leadership could rise.

The October surprise is here – President Donald Trump and his wife Melania tested positive for COVID-19. The leader of the world's most powerful tested country announced the news on Twitter and was tested after his adviser Hope Hicks also contracted coronavirus. 

The bombshell news has sent stocks falling and the dollar higher – and for three good reasons, that could continue pushing it lower.

1) Fiscal stimulus talks to collapse?

Trump's Treasury Secretary Steven Mnuchin has been active in pursuing a fiscal stimulus deal with Speaker of the House Nancy Pelosi. However, other prominent Republicans such as White House Chief of Staff Mark Meadows and Senate Majority Leader Mitch McConnell have been skeptical about a large relief package.

The president's leadership is critical in pushing a deal over the line and with the focus on the disease, it could remain stuck.

Markets proved that additional help from the government is often more important than who will be the next president. If negotiations fall to the wayside, shares could fall.

2) Tighter race?

Former Vice-President Joe Biden was in the same room with Trump for the presidential debate and is also a septuagenarian like the president. Investors seemed to get used to envisioning Biden replacing Trump, providing a safe pair of hands, providing more stimulus, and improving relations with the world – despite potential new regulation.

Concerns about Biden's health – at least until he tests negative – may also rise. Moreover, sympathy towards Trump could push voters toward him and prompt tighter polls, raising uncertainty.

If Biden wins with a narrower gap, there is more room for Trump to cry foul and litigate the results, potentially triggering a constitutional crisis. That is the nightmare scenario that markets are wary of.

3) Pence-Pelosi dynamic duo?

The third layer of uncertainty comes from a potential deterioration in Trump's health. Current reports are that the president and his wife are doing well and asymptomatic. However, if he were to fall ill, Vice-President Mike Pence would take over. 

Pence is a conservative that may lead as a more traditional Republican, but his politics have been aligned with Trump. Democrat Pelosi, in her role as Speaker of the House, may become Vice-President, causing a peculiar situation. 

Concerns about a lack of leadership also weigh on markets. 

Conclusion

Uncertainty in markets is set to continue until Trump returns to normal activity, which could take more than a week. During this period, pressure on stocks will likely persist. 

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

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD struggling around 0.6400 and at risk of piercing the year’s low

AUD/USD struggling around 0.6400 and at risk of piercing the year’s low

Disappointing Australian data and a deteriorated market mood weighed on AUD/USD, quickly approaching the 2022 low at 0.6362. RBA’s Financial Stability report coming up next.

AUD/USD News

EUR/USD extends decline sub-0.9800 as risk aversion intensifies

EUR/USD extends decline sub-0.9800 as risk aversion intensifies

The American dollar maintains a strong upward momentum amid renewed inflation and recession concerns. EUR/USD further retreated after failing to regain parity mid-week.

EUR/USD News

Gold struggling to retain its bullish strength

Gold struggling to retain its bullish strength

XAUUSD shed some ground on Thursday, currently hovering around $1,713.00. The dollar has gathered momentum as Wall Street opened in the red, holding into negative territory at the time. Also, government bond yields resumed their advances and hold near fresh weekly highs.

Gold News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: The next move could surprise us all

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: The next move could surprise us all

The crypto market displays mixed signals but hints that the bearish trend is not over yet. Adopting a get-in-get-out mentality may be the more favorable approach for investors looking to expose themselves to the market.

Read more

US September NFP Preview: Analyzing gold's reaction to NFP surprises Premium

US September NFP Preview: Analyzing gold's reaction to NFP surprises

Historically, how impactful has the US jobs report been on gold’s valuation? In this article, we present results from a study in which we analyzed the XAUUSD pair's reaction to the previous 26 NFP prints.

Read more

Majors

Cryptocurrencies

Signatures