Financial markets react to the upcoming presidential election results

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This will truly be a historical week with two major events occurring. First and foremost is the presidential election which took place today. Although a winner will not be announced till much later in the evening, the excitement from both sides of the aisle with each candidate conveying an optimistic outlook with the belief that either candidate could become the next president of the United States. If President Trump the incumbent is successful, he will remain as the 45th president of the United States. If his opponent Joe Biden is elected, he would become the 46th president of the United States.

On November 5th, Federal Reserve members will meet for this month’s FOMC (Federal Open Market Committee) meeting. Federal Reserve Chairman Jerome Powell will conclude the meeting as he always does with a statement and then a series of questions from the press will be answered.

According to many analysts, the expectations that there will be new policy actions of significance are very low. We can expect the former guidance conveyed for future policy to remain largely unchanged. What might be interesting is the fact that this meeting is being held within days of a presidential election and Fed members will have to incorporate either a new president or the incumbent winning a second term.

With the release of the Federal Reserve’s “dot plot” in September it seems highly probable that they will follow the guidance and timeline that they laid out. It is highly unlikely with the current economic contraction and the pandemic swelling to alarming heights that they will even discuss the possibility of an interest rate hike. If they follow the guidance, they laid out in September there will be no interest rate hikes for the remainder of the year, as well as 2021.

So, what becomes exceedingly important is the passage of a fiscal stimulus bill. Currently, the House of Representatives via Nancy Pelosi has dug in deep and has not compromised on her key demands that the aid package sends relief capital to many states that need it. However, that could dramatically change if Joe Biden wins the presidential election. It is the optimism that a fiscal stimulus aid package will be forthcoming that has driven both U.S. equities (risk-on assets) and gold (safe-haven asset) to higher pricing.

As of 4:33 PM, EST December gold futures gained $17.20 (+0.90%) and is currently fixed at $1909.70. Gold futures traded to a high today of $1912 before slightly backing off of that intraday high. Both gold and silver had net gains today that were approximately 9/10 of a percent. December silver futures gained $0.22 (+0.97%). The Ishares Silver Trust (SLV) is currently fixed at $22.44, and the SPDR gold trust shares are currently fixed at $178.92, gaining just over a dollar per share in trading today.

As the election results unfold and the winner and next president of the United States are announced we could expect to see some knee-jerk reactions and increase volatility. But as far as the winner goes it’s not over till the two old men sing.

Wishing you as always, good trading and good health,

Gary S. Wagner - Executive Producer