There’s a pandemic, an economic rebound losing steam, stalled business talks in Congress, and a deeply controversial election that has sparked the specter of a constitutional crisis. As if that wasn’t enough to worry investors, President Trump gave another cause for concern in the early hours of Friday morning.
Mr Trump’s nightly announcement on Twitter that he tested positive for the coronavirus was the last in a long list of frustrating variables for investors looking for signs of stability.
Perhaps that is why the disclosure of Mr. Trump’s illness had a more subdued impact on the market than some of the President’s past health fears.
“It’s less of an event than you might think because it didn’t come out of the clear blue sky, but just amid other confusion,” said Charles Geisst, market historian and professor emeritus of finance at Manhattan College. “Such things are just not unexpected anymore. This year it’s just normal. “
Even as the pandemic found its way into the Oval Office, the S&P 500 only closed 1 percent – a fairly ordinary day considering the Labor Department reported that employers brought back nearly 200,000 fewer jobs than economists in September expected.
The decline in stocks was a far cry from the September 1955 news that President Dwight D. Eisenhower had a heart attack, a bulletin that sent the S&P 500 down 6.6 percent in one day. And when President Ronald Reagan was shot dead on March 30, 1981, the news was enough to halt stock trading, which helped limit losses to just 0.3 percent. (When President John F. Kennedy was assassinated on November 22, 1963, the sell-off in a shortened session was 2.8 percent.)
“After an initial response, the news is likely to have a lasting impact on the market only if it affects election results or public health,” said Paul Donovan, chief economist at UBS Global Wealth Management, in a statement to clients.
On Friday evening, the White House announced that as a precaution, Mr. Trump would be at the Walter Reed National Military Medical Center for “the next few days.” Vice President Mike Pence and Mr Trump’s Democratic opponent, former Vice President Joseph R. Biden Jr., who shared a stage of debate with Mr Trump on Tuesday, both tested negative.
While Mr Trump’s illness did not panic investors, it added to the many concerns that already aroused them as a previously violent market rally had erupted in recent weeks.
This is in part because investors are starting to incorporate political risk into their outlook. The prospect of democratic victories in November makes investors aware of the potential impact of higher corporate taxes and increased regulation. And then there is the worrying possibility that Mr Trump might refuse to accept the results of a vote he is losing, a possibility he has raised several times.
“A close and controversial outcome with a protracted period of resentment and instability would be bad news for the markets,” said Trevor Greetham, fund manager at Royal London Asset Management.
Investors also appear to have resigned themselves to the slim likelihood that the White House and Congressional Democrats will reach an agreement on another stimulus package. Just a few months ago it was an article of faith on Wall Street that policymakers would easily agree to spend trillions of dollars more – give or take – to support American households and businesses while the country waits for a vaccine.
Randy Watts, chief investment officer of O’Neil Global Advisors, a financial advisory firm, said Mr. Trump’s illness made all the more reason for investors to remain cautious in the meantime. “I think this gives investors plenty of reasons to stop and not bring new capital into the market until we are much closer to the choice.”
Stock futures fell more than 1 percent overnight trading, according to Mr. Trump’s Twitter post, and stocks fell about 1.4 percent when trading began in New York. However, those losses were reduced during the morning thanks to strength in key sectors such as industrial and materials companies.
For some analysts, gains in these sectors coincided with the notion that Mr Trump’s diagnosis increased the chances of a major November Democratic election victory, another round of fiscal stimulus, or perhaps both.
On Friday, California spokeswoman Nancy Pelosi was again optimistic that her talks with Treasury Secretary Steven Mnuchin could result in a non-partisan coronavirus package deal, suggesting that Mr Trump’s positive test for coronavirus will change the tenor of the negotiations could.
Inventories closely related to infrastructure projects increased. Asphalt makers Vulcan Materials and Martin Marietta Materials rose 1.8 percent and 2.4 percent, and construction equipment company United Rentals rose nearly 5.5 percent. Several stocks of health care closely related to the Affordable Care Act also rose.
In the bond market, long-term government bond yields rose slightly, possibly leading to larger deficits – and thus somewhat greater inflation risks – that were linked to another round of federal stimulus spending.
“This is either the market telling you the likelihood of a stimulus is rising, or investor positioning for the potential for a blue wave,” said Yousef Abbasi, director of US institutional stocks at StoneX, a brokerage firm.
Some analysts also believed the president’s diagnosis could help alleviate investor concerns about the growing chances of post-election chaos.
Those worries have grown in recent weeks as Mr Trump tightened his false claims that mail-in ballots were fraught with fraud and, more recently, repeatedly refused to commit to a peaceful transfer of power if the vote count resulted in a Biden victory shows.
JP Morgan analysts wrote on Friday that the president’s illness slightly increases Mr Biden’s chances of winning and “could slightly reduce post-election risk and market uncertainty”.