Trump's Coronavirus Diagnosis And Its Impact On The Stock Market

Markets traded lower on Friday after U.S. President Donald Trump tested positive for the coronavirus just one month ahead of the November election.

Trump and First Lady Melania Trump both tested positive shortly after top Trump aide Hope Hicks tested positive. Trump’s diagnosis comes just three days after his first debate with Democratic nominee Joe Biden. Early reports suggest Trump is experiencing “mild symptoms” but is in “good spirits.

Trump is 74 years old and overweight, placing him in two high-risk demographics.

Several analysts and market experts have weighed in on the impact Trump’s positive test could have on the market.

No Market Panic: Joseph Brusuelas, Chief Economist at RSM US LLP, said the initial market reaction suggests there is not a large-scale flight to safety asset classes on Friday.

“Rather, the initial knee-jerk reaction may stimulate volatility in equity and FX markets that is likely to subside in the coming days,” Brusuelas wrote.

The Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN (BATS: VXX) traded higher by 4% on Friday.

Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said Trump’s diagnosis overshadowed news that the U.S. unemployment rate has dropped below 8%.

“To the extent that government functions as normal, markets will be concerned, but not necessarily panic, however, this incident highlights how Covid-19 continues to be a threat to the economy and markets,” Zaccarelli said.

Peter Essele, Head of Portfolio Management for Commonwealth Financial Network, said it's reasonable to assume markets will be shaky in October given all the uncertainty surrounding the election and the pandemic.

“Investors should remain vigilant and consider some type of portfolio protection, as there remains a very real possibility that the market’s gains over the previous two quarters will steadily erode in the months ahead as we close out a year that many would like to forget,” Essele said.

Potential Silver Linings: Jamie Cox, Managing Partner for Harris Financial Group, said a positive test from Trump is not nearly as devastating for the market as it would have been back in March.

“Markets could have some unexpected reactions as this could break the log jam in current stimulus negotiations,” Cox said.

Bloomberg senior editor John Authers said Trump’s diagnosis may go a long way in convincing Americans who believed the coronavirus pandemic was a hoax.

“Negative news for the economy, because the chances of a significant relaxation in lockdown provisions.. have just been sharply reduced,” Authers said.

Jeff Buchbinder, Equity Strategist for LPL Financial, said defensive assets such as gold, the yen and Treasury bonds have been surprisingly calm in Friday morning trading.

“Markets appear to be increasingly pricing Joe Biden in as the favorite, and this news may not change that, but Trump could gain support from a quick recovery as UK Prime Minister Boris Johnson did during his battle with COVID-19,” Buchbinder said.

Benzinga’s Take: A positive test for President Trump is obviously bad news for the stock market and for every American. However, the market’s muted reaction likely has a lot to do with the timing of the diagnosis given the nation was already just a month away from a potential transfer of power.

https://www.benzinga.com/analyst-ratings/analyst-color/20/10/17756000/experts-react-to-trumps-coronavirus-diagnosis-and-its-impact-on-the-stock-market