Nobody knows very well what has happened in the bags this week. They have risen a lot (7% on average) on both sides of the Atlantic although "the worst possible scenario" has materialized for the markets: what Donald Trump put the electoral result in solfa and go to the Supreme Court. Despite this, the squares have advanced one day after another with forcefulness.
Seen what is seen, the word that is repeated the most now in the reports of investment firms is volatility, more after these last strong rises have taken place after the strong falls of the end of October. Experts are at a loss because this good reaction from the week we just left It was something that nobody anticipated. However, it has happened and now there are many who foresee that the dynamics will be this in the short term: Sudden comings and goings highly conditioned by the 'Trump effect'.
THE STRENGTH OF ENVITE
Volatility will be fueled in the coming days, to a large extent, by this turbulent situation on the other side of the Atlantic. "The uncertainty that still surrounds the elections invites greater volatility in the coming days", recognize from Monex Europe. It will be necessary to see what Trump's stake remains, if it dilutes like a sugar or goes to more, tensing the situation to a greater extent.
"If (Donald Trump's) challenge remains legal, markets should avoid high volatility. However, If it led to mass demonstrations and violence, markets could see movements towards quality assets, which would weigh on risk assets"anticipates Franck Dixmier, director of global fixed income investments at Allianz Global Investors.
From Moody's they recognized this week that the lack of an immediate conclusion of the electoral process can increase volatility, but added that any subsequent dispute over the results it will be done "in a manner consistent with the frameworks established around the rule of law and without causing any significant and lasting credit impact". For the same reason, the agency maintains its sovereign rating on the US ('Aaa', stable outlook). However, it states that "the credit implications will occur if the last course of events leads us to review this assumption."
Be that as it may, volatility is on everyone's lips. "I hope it continues," warns Darrell Spence, an economist at Capital Group; "Investors should prepare for increased volatility," warns Stefan Rondorf, senior investment strategist – global economics & strategy at Allianz Global Investors; "The prospect of a wave of recounts and legal battles could ensure a volatile period ahead," they predict from IG.
Bloomberg acknowledges that even with Joe Biden firmly established as US president, there are still many problems to solve: "Lawsuits related to the results in key states, the composition of the Senate, which remains in doubt, and possible public unrest if the result depends on the challenged votes." All this, he assures, "has the potential to cause more volatility".
"The market today believes we are looking at a long election, not necessarily a contested election," Amy Wu Silverman, derivatives strategist at RBC Capital Markets, said in a note this week. "If the market really happens to believe that we have entered some ugly and disorderly competition, I think we will see a spike in volatility."he added.
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