Investors’ reactions to what seemed to be an attempt to kill former President Donald Trump on Sunday night were a test of their knowledge of a dark day in U.S. history.
So far, the event wasn’t making people rush to safe investments like gold and Treasury bonds. In its place, investors might think about how the shooting at a Trump campaign rally in Pennsylvania on Saturday will affect the race between Trump and Vice President Joe Biden. But the market didn’t react right away. On Sunday night, U.S. stock index futures traded flat to slightly higher.
«This is a terrible event. “From a market point of view, we don’t think this event will have a big effect in the near future,” Keith Lerner, co-chief investing officer and chief strategist at Truist, told MarketWatch on Sunday morning.
There were more bets on Trump winning, but the overall trend was the same as what was seen after Biden’s bad performance in the debate on June 27.
Polls and prediction markets show that the S&P 500 SPX has done well since March when it comes to predicting that Trump will win the election. Analysts have noticed this. Most of the time, people want a clear outcome more than they want to talk about policy proposals. In fact, before March, the performance of the stock market was linked to Biden’s chances of winning.
A rise in the price of bitcoin BTCUSD, 4.51%, which trades 24 hours a day, seven days a week, was seen by investors as a sign that markets are likely to take into account the stronger chances of a Trump victory.
That makes stocks, bitcoin, and the U.S. dollar better investments than bonds and other safe havens, wrote Bob Elliott, chief investment officer at Unlimited Funds, on X:
It has been said by investors that a Trump victory would be good for the stock market overall because it could lead to more deregulation and the extension of tax cuts for businesses. But it has been said that the rise in the chances of a Republican victory caused the bond market to weaken, which caused Treasury yields, which move against price, to spike after the June debate.
No matter who wins, no one is likely to do anything about the growing U.S. debt. However, bond investors are now most interested in the idea of a second Trump administration with tax cuts, proposed tariffs, and other actions.
MarketWatch spoke to Mark Rosenberg, co-head and founder of risk-analysis firm GeoQuant, who said, “Given the widespread perception that the shooting increases Trump’s probability of winning, we may well see Treasury yields jump, as they did after the debate.” Rosenberg said that a flight to safety would have the opposite effect.
But investors may also want to pay attention to early signs that bond investors are becoming more aware of the political unrest in the United States. In the past, when investors were feeling nervous, U.S. Treasurys were a safe place to put their money. When investors are scared, they buy Treasurys quickly, which drives down yields.
But Rosenberg said that GeoQuant’s data shows that longer-term Treasury yields are becoming positively linked to higher U.S. political risk, even though the link is still very weak. He said that this makes the usual “flight to safety” demand for Treasurys less strong when there is rising risk in the U.S. political system. He also said that the firm’s main measure of U.S. political risk was already going up quickly before Saturday’s events.
What the dysfunctional U.S. government means for the stock market and investors (October 2023)
As is common in years with a presidential election, stocks have gone up in 2024. So far in 2024, the S&P 500 has risen almost 18%, with big tech stocks leading the way. The more cyclical Dow Jones Industrial Average DJIA has lagged behind, only up 6.1% so far this year.
When it comes to specific examples, investors don’t have much to go on. Some people have brought up the failed attempt to kill President Ronald Reagan in March 1981, not long after he started his first term.
As soon as people heard about the attempt, stocks went down. The New York Stock Exchange closed early, cutting the session short. In a note, Andreas Steno of Copenhagen-based Steno Research said that performance was pretty flat over the next three weeks, Treasury yields initially jumped in a flight to quality, and the U.S. dollar got stronger.
“I’d bet on a similar trend here, if it makes a difference,” Steno wrote.
But investors shouldn’t forget about other things in the months before the election either.
“This week was already going to be a big week for the Republican convention, and this will make it even bigger.” Still, the election isn’t until almost four months from now, and Lerner from Truist said, “A lot can happen between now and then.”
“We think that the most important short-term market drivers will likely continue to be things like the trend in economic growth, inflation, and corporate earnings,” he said.
