This week we’re going to take a break from COVID-19 to remind you of something else that will likely have a substantial effect on markets later in the year. Before the coronavirus began to ravage the globe, the upcoming presidential election was shaping up to be the economic story this summer and fall. Through the beginning of February, Bernie Sanders looked to be the Democratic front runner with relatively easy wins in the Iowa and Nevada caucuses and New Hampshire primary. Then Joe Biden used momentum from a big win in South Carolina to dominate Super Tuesday, ultimately locking up the Democratic nomination by the end of March.
For markets and investors, the important part of this early portion of the presidential race is that the candidate perceived as the least friendly to business, Bernie Sanders, will not be in the Oval Office come January. A continued Trump presidency will likely continue to be favorable to business, and a Biden presidency is shaping up to be a more progressive version of Obama’s eight years in which the domestic stock market experienced an unprecedented bull run.
We take this as a positive sign for markets. The mere potential for a Sanders presidency caused substantial volatility in February, and with this risk off the table, markets have a better chance of regaining their positive momentum in the fall. Of course, unless the coronavirus has anything to say about it.