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Summary
- The US stock market is witnessing continued volatility as investors keep reacting to the news on COVID-19 updates and discussion on impending stimulus.
- The stock market started gaining momentum on 05 October 2020 after President Trump’s health was reported to get better.
- While 12 October 2020 witnessed the Wall Street settling into a strong footing, driven by tech stocks making worthy gains, mixed earnings reports from major banks again led to a plunge in the stock market on 14 October
- While elections are less than a month far, earnings season might interest investors, and we might see some interesting trends emerging in the market.
The US tech stocks have marked a strong beginning to the current week and look to add more to the gains from the previous week.
12 October 2020 witnessed the common stocks of Apple Inc. (NASDAQ:AAPL) jump by 6.35%. Amazon.com, Inc (NASDAQ:AMZN) experienced a jump of 4.75%. Tesla, Inc. (NASDAQ:TSLA) shares went up by 1.91%. Microsoft Corporation (NASDAQ:MSFT) recorded an increase of 2.59%, and shares of Facebook, Inc. (NASDAQ:FB) went up by 4.27%, all in a single day.
On the same day, NASDAQ Composite ended 2.56% higher than the previous close. Dow Industrials, as well as S&P 500, also experienced a gain of 0.88% and 1.64%, respectively.
However, stock market has again plunged on the following days with S&P 500 closing below 0.63% and 0.66% from the previous close on 13 October and 14 October respectively. Dow Industrials also experienced loss in the said dates.
Interesting Read: How Is Wall Street Poised Ahead of Presidential Elections & Mixed Economic Signs?
Conserving Gains from Past Performance
In the last week of September, the stock market had witnessed a similar tech stock rally on 25 September but later plunged with President Trump testing positive for COVID-19.
The market rebounded since the week started 5 October with news declaring improvement in the health of President Donald Trump. The positivity in the market on 05 October 2020 was reflected by the 1.68% growth in Dow Jones Industrial Average Index that hit a fresh 1-month high. Similarly, the NASDAQ Composite Index climbed up 2.32%, and the S&P 500 Index rallied 1.8% to 3,408.62 points on the same day.
The gains continued with technology stocks on 12 October experiencing jump was observed post Trump administration commenced discussion on a leaner coronavirus relief bill on the previous day, as a broader package received resistance.
Related: Both Donald And Melania Trump Tested Positive For Coronavirus
Has the market started thinking beyond the upcoming elections in November?
The stock market has remained notably volatile ahead of the US presidential and congressional elections, to be held in November. The anxiety surrounding the elections is getting reflected on the movement of trading assets investors are banking upon to shield their portfolios.
Did you watch: Tech Space Under the Scanner Amidst Brutal Sell-Off
Market Movements amid Election Anticipations
Speculations point to the potential win of Joe Biden in the upcoming elections next month. This, along with the worries related to coronavirus-led developments, is making investors to put on their thinking cap and rebalance their portfolio for maximised profit and minimal loss.
This is evident from the significant movements seen across sectors which are likely to benefit from either of the parties controlling the White House and Congress. For example, in preparation for a potential Biden win, investors and traders seem to favour the shares of green-energy companies.
Broad election baskets linked with each political party are formed based on the typical sectors on Wall Street that are likely to pick up if one party wins. Once these baskets are created, market experts then keep track of these to make a probable forecast regarding who shall win the elections.
However, the impact on asset prices depicting the market movements and forecasts of the analysts do not always hold true, and the results might vary. In 2016, the victory of Mr Trump was a classic example of how anticipated election outcome may not come to fruition. In 2020 as well, Mr Trump is defying all the speculations regarding him losing the elections and sounds hopeful for a win.
Interesting Read: Clean Sweep for Biden anticipated, how is Wall Street placed?
Earnings Season to impact stock market performance
Another quarter of earnings season is just around the corner and investors are hoping for a better one after the US Q2 2020 earnings season failed to cheer investors amid the mixed impact of the COVID-19 on the performance of businesses.
However, hopes have dashed with major banks releasing a set of mixed earnings report on 14 October, hitting the banking sector stocks negatively.
Bottom Line
Although some experts do not align with the thought that the share market is not only an economic indicator but also a political barometer, the fact that market movements are deeply influenced by the upcoming presidential elections, and political events cannot be denied.
The upcoming election, along with the performance of current earnings season, delayed vaccine availability and hopes for a bigger stimulus to aid economic recovery, may lead to a repeated pattern of choppy trading in the market.
Overall, nothing remains sure in the prevailing uncertain times and focusing on the long-term position of their portfolio may reduce the impact of the current short-term volatility.
