Trump has COVID Markets Drop

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Trump has COVID markets drop
All eyes on NFP
Nikkei1 -0.67% Dax -0.56%
UST 10Y 0.66
Oil $37.89
Gold $1908/oz
BTCUSD $10488/oz.

Asia and the EU

North America Open
USD NPS 8:30

President Trump has tested positive for COVID sending US equity futures down by more than 1% as investors feared that his illness could bring further turbulence to what is already a highly contested and acrimonious election campaign.

Because the illness path of COVID is so variant, with some infected patients simply experiencing a few days of mild flu-like symptoms while others fall victim to pulmonary and vascular problems that could cause death the key question for the market and the world will be just how severe is the President’s infection.

Analysts have pointed out that infected patients 74 years of age or older have a 34% chance of hospitalization and complications increase with commodities such as obesity – all of which put the President at high risk. From a medical point of view, the period of greatest concern is about one week from infection when severely ill patients develop pneumonia from the virus infection. If the President can avoid that scenario his chances for speedy recovery will rise markedly.

There is no doubt that the President is receiving the highest standard of care in the world and with the state of art in COVID treatment markedly better than six months ago the White House medical personnel may be able to avoid the most adverse outcomes through a variety of prophylactic treatments.

Regardless of the medical prognosis, the President will be sidelined for two weeks during the final month of an increasingly bruising election campaign which he is already losing in the polls. Although some betting markets have now pushed the chances of a Biden Presidency to 90% the fact of the matter is no one actually knows how this latest wrinkle of fate will play out. A swift recovery could usher in a wave of sympathy and reaffirm President’s laissez-faire attitude towards the virus and shift sentiment his way in key battleground states. A severe bout and possibly even hospitalization would not only endanger his life but his political chances as well.

Against this latest news, the Non-Farm payroll release has lost much of its market-moving power as traders will no doubt focus on the pronouncements from the White House. Still, the data could have some impact especially if it skews to the downside. The market expectation is for a 900K print versus 137K a month ago. The ADP figures on Friday were encouraging but the most accurate forecaster of NFPs – the employment component of the ISM Non-Manufacturing report won’t be available until Monday leaving forecasts in a wide range. There is no doubt that most of the recovery upsurge in demand from COVID lows has already occurred. The key question is whether the labor demand in August continued to rise as more business reopened or whether most of that rebound already occurred in July.

A strong beat in NFPs could provide some relief to the selloff we are seeing now and stock may even attempt to rally if news out of the White House suggests that the President is not suffering any severe symptoms, but a weaker print along with tonight’s bombshell could usher in a wave of relentless selling into the weekend as investor sentiment turns sharply negative.

Boris Schlossberg
Managing Director

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