Goldman warns delayed election results this November similar to Bush-Gore could rock the market
Joe Biden and Donald Trump
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Goldman Sachs is warning that the upcoming presidential election could see delayed benefits, and is consequently recommending that purchasers hedge their current market bets by means of December in anticipation of heightened volatility as a result of November.
Goldman Sachs Main U.S. Fairness Strategist David Kostin explained that a quantity of factors could delay the success further than November 3, which includes a increase in mail-in ballots as Covid-19 retains people today from voting in person.
“Provided the quite a few-7 days delay in finalizing the results of the 2000 presidential election … the elevated volumes of mail-in ballots utilized in current main elections, and opportunity for elevated mail in ballots this November, we see heightened threat that election-related volatility could lengthen past Election Working day,” he explained Tuesday evening in a observe to consumers.
Kostin observed that traders in the possibilities industry seem to believe that the following president may well not be declared on Nov. 3. On the lookout at that current market, he observed that implied volatility close to the election is “really substantial when compared with prior cycles.” Some of this has to do with the ongoing impacts of the coronavirus, of training course, but the primarily superior stage of implied volatility instantly just before and following the election indicates that traders imagine the final result could be unsure.
Specified this, Kostin explained to Goldman customers they really should hedge their sector publicity into December in purchase to stem any losses incurred from a non-definitive election outcome.
“Even though the 20-Nov option expiration presents two extra months of cushion further than 3-Nov, the possible for delayed effects, a precedent for prolonged vote-counting, and a a bit inverted phrase composition guide us to want extending hedges to the 18-Dec quarterly expiration,” he claimed.
“For context, it took 34 days for the winner to be decided in the 2000 contest in between George W. Bush and Al Gore,” Kostin extra.
– CNBC’s Michael Bloom contributed reporting.
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