Some US stocks could face more volatility next week as President Donald Trump and rival Joe Biden face off in their first debate ahead of a November election that betting services currently view as almost a coin flip.
A strong performance in Tuesday’s debate by Biden, who currently has a modest lead in betting odds and polls, might boost stocks related to global trade and renewable energy, while a perceived debate victory by Trump could benefit fossil fuel and defense companies.
The first of three scheduled debates comes at a fraught moment on Wall Street.
The S&P 500 has tumbled 10 percent from record highs in recent weeks as investors worry about a prolonged recovery from the coronavirus and uncertainty related to the Nov. 3 vote, including the possibility of a delay in announcing a winner.
If one candidate emerges stronger on Tuesday, “the debate could be an individual stock and sector play,” said Jack Ablin, Chief Investment Officer at Cresset Wealth Advisors.
“For example, I think life under Biden would be a lot simpler for Apple than life under Trump,” Ablin said, referring to Trump’s trade conflict with China.
Individual stocks and other assets have been susceptible to market moves as a result of debates, even as broader markets have generally shrugged them off.
The Sept. 26, 2016 debate between Trump and Hillary Clinton, for example, sparked a 2 percent surge in the Mexican peso, as well as moves in oil, gold and Treasuries, according to a University of Michigan and Dartmouth College study.
Many investors view Biden as more likely to raise taxes, and see a second term for Trump, who favors deregulation, as better for the overall stock market. At the same time, a Trump win could spark concerns over ramped up tensions between Washington and Beijing.
With expectations of a delayed vote count, the options market shows investors are bracing for volatility in November and December.
Trump declined on Wednesday to commit to a peaceful transfer of power if he loses, and said he expected the election battle to end up before the Supreme Court.