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The U.S. Presidential Elections and Financial Markets

Posted: Monday, September 28th, 2020

Estimated Reading Time: 2 minutes

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The U.S. Presidential elections scheduled for November 3rd remain the main event for financial markets for the period ahead. Considering that the last quarter of the year starts in a couple of days, the elections in the United States will influence the rest of the year’s market activity.

Already from this week market participants had a sense that the election day comes closer. The New York Times revealed over the weekend that Donald Trump paid only $750 in income taxes the year he became president.

The news came as a blowout for republicans in the tight race for the White House. However, the closer we get to the U.S. Presidential elections, the bigger the impact of such news on financial markets will be.

U.S. Presidential Elections

Three Debates Scheduled Before the U.S. Presidential Elections

The two candidates agreed to participate in three presidential debates prior to the election day. September 29th is the date for the first of the three, and financial markets will closely monitor the event.

Organized in the form of a ninety-minute event without advert breaks, the first debate focuses on topics picked by the moderator and sent to the candidates one week earlier. The likelihood is that we will hear about the candidates’ position on China, coronavirus, the overall economic performance in the United States, and so on.

Traders from Europe should know that the debate takes place during the European night. It starts at 02:00 AM London time. Therefore, the markets will react during an illiquid time. As such, expect wider spreads than usual.

Moreover, some brokers already announced an increase in margin requirements ahead of the U.S. Presidential elections. The measure, viewed as protective for the customers, comes in light of the high volatility expected.

Literally, every week from now on will bring something new on the elections front. The only debate between vice-presidents is scheduled for October 7th, and in the following weeks, the other two presidential debates will follow.

Expect the markets to devour the events. Discussions about trade, foreign policy, geopolitics, also matter for financial markets. Moreover, the coronavirus pandemic will likely contribute to the increase in the market’s volatility.

All in all, the weeks ahead of the elections rarely bring something else beside consolidation. Even violent moves turn out being just false breakouts, as no one wants to take a chance until the elections day.

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