The current American presidential elections are considered the highest risk of financial markets throughout history in light of the usual way to bet on the fluctuations.
The possibilities of the US presidential elections scheduled for November 3, are increasing into chaos, and there is a set of scenarios presented to workers in the financial markets, which could not be thought before.
Bloomberg News asked these scenarios in the form of questions, including what if President Donald Trump lost the elections and refused to recognize the result?What if his democratic rival Joe Biden lost and refused to admit the result?And what if Trump wins a majority in the electoral complex and lost in the popular vote, which opens the door to a wave of popular protests that the country has not seen before?
According to Gerd Dynian, an economic analyst and author of the book "The Wooding of the Street: Money and Insanity in Lehman Brazers", who won the award for the best book in 2011 from Newsweek, these scenarios are not the only one presented.
Dolian added that he tends to the scenario associated with the votes that will take place via mail that may record a record this time because of the Korona virus pandem.
Disturbing scenarios
Democrats in general tend to vote via mail under the pandemic, while Republicans tend to vote in polling stations.Therefore, Trump may apply to his opponent Biden with the start of sorting the votes, then the retreat begins with the arrival of the upcoming ballot cards by mail and sorting them.Therefore, we can imagine the form of the political climate in light of such a scenario.
Dolian says that he does not talk about who wins the elections, because the financial markets are now focusing on the nature of the electoral process more than its focus on the result..
The world will make fun of the United States when it comes on November 3 and passes without announcing the name of the president who won the elections, whose announcement may be delayed for several weeks.
"We learned that investors have taken hedge measures before the elections with the aim of protecting their investment portfolio from any rapid decline," Dleian says in an analysis published by the Bloomberg AgencyThe most complex hedge.
Investors options
It is noteworthy that the "options situation" contracts allow the investor or the investment fund to bet on the future of a company or an index, as the contract allows its owner to sell the company’s share at a specific price before a specific date regardless of the share price in the market.
The hedges have become common, which led to a significant increase in the levels of implicit fluctuations in the markets.
وذكرت خدمة بلومبرج نيوز الإخبارية أنه The current American presidential elections are considered the highest risk of financial markets throughout history in light of the usual way to bet on the fluctuations.
But the unusual is that the fluctuations are increasing with the rise in stock prices, which is rare.The hedging against the elections is partly responsible for this phenomenon.
Historical depth
History says that when the volume of trading in the money markets is very large, it is unlike.
And imagine that if every investment fund bought contracts for "options" on a wide market index, before the elections.If the price of shares declines after the elections as expected, the boxes will sell their options as a precautionary measure, as the contracts will have increased in terms of value, but the decision to give up the funds from the hedge purchases will cause more rise to the stock market.
This means, if everyone expects prices to drop, it is difficult for the market to decline in a sustainable manner, and this will lead to a kind of contradictions that we see recently, as a negative accident occurs and at the same time the markets rise.
It can be said that the investment hedge funds and workers in the stock market are not currently hedging against the unwanted result for the elections, i.e. the victory of the democratic candidate, Joe Badin, who progresses on Trump in most major opinion polls, and undertakes to increase taxes is bad for the economy and markets, but they surround whyIt is the most dangerous, which is the collapse of the entire electoral process and the country's entry into a constitutional crisis.
Technology stock bubble
What if the Constitutional Court intervened to resolve the dispute over the election result, as happened in 2000?During that period, the stock market was already at the height of the crisis of the explosion of the technology stock bubble, but the ambiguity that surrounded the outcome of the elections was strong and continuous pressure on the shares throughout the last quarter of that year.
Finally, economic analyst Dolian says that investors have spent most months of the current year while trying to know how the stock market is good in this way, while the economy conditions are very bad..One can imagine the extent of contradiction and inconsistency that investors will face during the last two months of this year after the elections..