• Phase one, there's a shock. The market panics, everything gets sold. Selling is indiscriminate and that's what we had and that the crisis this time was a health crisis.
• The second phase of any sell off and recovery is the snapback. The market goes, "Yes, you know what? We've oversold, we've panicked. There's lots of bargains here. Let's buy some things. And the market rolls back, but there's still uncertainty.
• The third phase, and this is where I think we are now, is reality. So reality is companies have a grip on their earnings. They're giving guidance, getting more of a grip, poor economic data is coming through. Eventually, that'll start to slow down and you'll start getting signs of a rebasing. So we're in this rebasing phase, trying to work out what's the starting point. When does the trough come in economic terms and in earnings terms. We think as we get through June, that will definitely be the rebasing point. And as we progress from there globally, we'll start getting better news on the economy and better news on earnings. And that's the fourth phase that happens then.
• The fourth phase is a genuine, steady recovery off a much lower base and the base is low because COVID is basically stopped develop market economy. Recovery off that lower base and more of a normalised, steady recovery.

The Stock Market May No Longer Care If Trump Wins the Election

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By

Ben Levisohn

June 8, 2020 2:43 pm ET

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U.S. President Donald Trump speaks during a coronavirus task force press briefing in the Rose Garden of the White House in March. (Photo by JIM WATSON/AFP via Getty Images)

AFP via Getty Images

2:37 p.m. At one point in time, the stock market appeared to care a lot about whether President Donald Trump would win re-election in November. Now, not so much.

That’s according to an analysis of betting markets done by Lori Calvasina, chief U.S. equity strategist at RBC Capital Markets. For much of the past 12 months, the S&P 500 has moved in tandem with the president’s odds of winning the election, based off data from PredictIt, a political betting website. The end of year rally in 2019, for instance, coincided with an increase in Trump’s odds of winning the election rising to close to 58%, according to Calvasina’s math. The president's odds of winning fell with the market in February and March, rebounded in April, and then went sideways in May.

Last week, however, was the first week that the S&P 500 rose as Trump’s odds of winning the election fell. “For the past year, expectations as to whether Trump will win again in November (as tracked by the betting markets) have been moving in sync with S&P 500 performance,” Calvasina writes. “But that relationship has broken down a bit in early June, with Trump’s chances (according to the betting markets) falling and the S&P 500 surging.”

Calvasina notes many caveats. For one, it’s just a week’s worth of data, and could be temporary. There are, after all, about five months before the election. And if the recovery thesis proves to be true, then the president’s odds of winning could snap back with the economy. Still, Calvasina thought it was important to highlight. “Something did change,” she says. “This is an issue we’ll be exploring.”

The S&P 500 is rising again on Monday. It was up 0.8%, while the Dow Jones Industrial Average gained 321 points, or nearly 1.2%.

Write to Ben Levisohn at [email protected]