Former U.S. president Barack Obama once famously said, “Elections have consequences.” Although he wa♛s referring to polཧicy and the direction of the country, elections also have serious implications for markets and volatility.

In 2016, the three months preceding the presidential election saw implied options volatility for the S&P 500 (measured by the VIX) range between 10% and 15%. That same index had been between 25% and 40% going into the 2020 election. In our disc𝓰ussion for OpenMarkets Roundtable, CME Group Senior economist Erik Norland noted that “implied volatility tends to be elevated in October prior to an election but then falls quickly if the outcome is decisive.

An Air of Uncertainty

Although it’s certainly possible that implied volatility levels signaled the potential of a contested election, the truth is probably more complicated. Veteran trader Jack Bouroudjian added “elections bring an air of uncertainty” and reminded us💯 to “keep in mind, traders and investors are political, but markets are apolitical.” I think this statement is completely true and would add that markets are a discounting mechanism for future outcomes.

My view is that the 2020 election appeared to have more market-moving potential than most past elections, and the options pricing seemed to agree. Issues like economic stimulus, pandemic mitig💖ation strategies, health car🌊e and energy policy all could be viewed differently depending on the election’s outcome.

Since 1928, only four Presideꦇntial election cycles have experienced negative returns for the S&P 𒊎500.

Risk On

Markets can be fickle. Through the first part of October, futures markets saw large trades made in antici✱pation of higher long end rates and a steeper yield curve. These trades seemed to reflect a belief that “risk on” would be the election theme and that inflation could become a concern based on ramped up expectations for government spending.

Closer to the election, markets appeared to be rethin🍨king that thesis. As Norland pointed out, stocks suffered and bonds rallied following the contested 2000 election.

澳洲幸运5官方开奖结果体彩网:  

A presidential election, like any binary outcome, can present both risks and opportunities🌱 for traders. Identifying risks and knowing how to use futures as tools for mitigation is a crucial ingredient in navigating volatiꦜle markets.  

澳洲幸运5官方开奖结果体彩网: Catch the full roundtable disc🙈ussion on&ꦛnbsp;