The riskiest election in US history

US stock indices shrugged off news of Donald Trump’s hospitalisation over the weekend. The S&P 500 hit a one-month high as Trump was discharged on Monday. Yet the early optimism was undone when Trump ordered an end to talks with Democrats on a second stimulus bill. The S&P 500 finished Tuesday down by 1.4%.

The first stimulus bill lapsed over the summer, leaving unemployed Americans to depend on a patchwork of measures rolled out by the White House and individual states. The Democrat-controlled House of Representatives had initially called for $3.4trn in new support measures before reducing its demand to $2.2trn last week, while the Republican-controlled Senate favoured a figure closer to $1.6trn.

Would equities prefer Biden?

Trump’s surprise announcement that he would ask Republican allies to stop negotiating a stimulus will please fiscal conservatives wary of ever more federal spending, says the BBC’s Anthony Zurcher. Yet it is difficult to see how this benefits Trump politically. A new wave of economic angst before the election will do the incumbent no favours.

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The odds of a Joe Biden victory leapt over the weekend in betting markets, says Irwin Stelzer in The Sunday Times. That could be good for stocks, which “abhor uncertainty” when Trump is “uncertainty incarnate”. JPMorgan and Citigroup argue that a Biden presidency will be bullish for shares. They say it could deliver an economic “sugar high” from stimuli, especially if Democrats also take the Senate, as is looking increasingly likely.

In reality, investors are broadly agnostic about who prevails in November, Scott Knapp of CUNA Mutual Group tells the Associated Press. “It’s pretty difficult to overstate how understated the market’s reaction was,” to the president’s Covid-19 diagnosis. Investors don’t care for Donald Trump’s trade wars, but they seem just as unexcited about Joe Biden’s tax and regulate agenda. What does scare them is the prospect of a disputed election.

The president is unwell

Most presidential health scares make little impact on markets, but there have been exceptions, says Lex in the Financial Times. Eisenhower’s heart attack in 1955 saw the S&P 500 fall by nearly 7%, while it dropped by 3% following JFK’s assassination in 1963. Yet three months later – and this applies to nine out of ten pre-Trump health incidents – the market was either up or down by less than 1%. (The exception was Truman’s 1952 hospitalisation.) That is a testament to the strength of America’s institutions, which do not depend upon the health of one man.

Trump’s illness may have a larger impact than usual as it could shape US pandemic policy, says Jeremy Warner in The Daily Telegraph. Yet all this fretting about the election and American democracy seems overdone. Investors may complain about Washington, but they still buy the dollar and that says a lot more than words alone.