We welcome you to a crucial trading week that has a potential to set the tone for financial markets for the rest of the year.
The main event will be tomorrow’s U.S. election, with Democratic nominee Joe Biden leading President Donald Trump in polls. However, the senate may matter more for the markets than the President since a so-called “blue wave” (Democratic sweep) scenario is believed to be priced in and if Biden wins the presidency but his party does not gain enough seats in the Senate than we will have the worst scenario for the market.
In short, a divided government will be poison for the markets while a shift in control in the Senate (blue wave congress) could quickly pass a large stimulus plan, which is considered market friendly. But we bear in mind, that despite a Biden lead, Trump has a narrow but viable path to an election win, even though the surprise 2016 election result is less likely this time.
Given the fact that the coronavirus pandemic is driving record numbers of people to vote by mail and counting all votes could take days, or weeks we may need to wait longer than usual to learn who won the presidential race this year.
Whatever the outcome, we will prepare for swings on either side to get the best out of the market’s reaction.
While the U.S. election is front and center in the coming days, we also have the Bank of England and Federal Reserve meeting (Thursday) as well as the U.S. labor market report (Friday) on this week’s calendar.
The Bank of England is widely expected to add to its own bond-buying program as new coronavirus lockdowns put pressure on policy makers to act. The new lockdown in U.K. could also bolster talk of negative interest rates, which could weigh on the pound.
The Federal Reserve, which also meets this Thursday, has signaled that it’ll do what’s needed to keep borrowing costs contained.
This week will most likely be accompanied by a sharp rise in volatility, which is why traders should prepare for larger and sharper market movements.
We wish everyone good trades and hopefully a good profit!
We wish you good trades!
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