What if there was an election and no candidates came?

As we set out to write an opinion piece on what either the re-election of Donald Trump or the election of Joe Biden would bring for the financial markets, we thought we would wait to see how the debate went on Tuesday. Unfortunately, but perhaps not surprisingly, the debate offered little to nothing regarding policy on stimulus, COVID-19 relief plans, business regulation, tax plans, environmental regulation, global trade, or healthcare. We are probably missing a few items but since the “debate” was little more than 90 minutes of shouting and insults, we can assume that discussion of missing topics will be at the next debate.

Nevertheless, we were ready to soldier on since we have a good idea of each candidates’ views. Then, President Trump ended up in the hospital with COVID-19. Now, we must factor into our view the fact that the President might not even be in shape to run in 30 days. Moreover, we also have to consider that despite being more cautious than President Trump, former Vice President Biden is 78 years old. He was standing six feet away from the President on Tuesday night, is still on the campaign trail, and is surrounded by campaign staff. Then, of course, we have Vice President Pence, perhaps vulnerable, as he was at the Rose Garden event that seems to have been a super-spreader. He will also be on the campaign trail as President Trump recovers. Since this is 2020, we cannot rule out anything.

We think it is obvious that if we get closer to November 3 and the President is not well—and perhaps his opponent is not well either—that we will have maximum chaos. Equities have so far not only defied losses, they have prospered during a global pandemic, high and sustained levels of unemployment, a record drop in GDP, and entire industries on the brink of ruin. To all of that, add the President of the United States and the Republican leadership in the Senate coming down with COVID-19, and the oncoming freight train of consumer and commercial loan defaults as foreclosure moratoriums and payment forbearances expire. If we have an election where one or both septuagenarian candidates are in the hospital with a deadly virus, we think even the youngsters on Robinhood will sell! Cash will be king as an event such as this would bring back the crazy days of last March before the Fed stepped in along with Treasury and implicitly or explicitly guaranteed almost everything. Unfortunately, this scenario does not have a probability of zero, so we would be dialing down a few degrees of both credit and interest rate in risk portfolios now. Better to get a clearer picture of President Trump’s condition in the next week or so.


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