US Open – Some good news to start the week

Downside risks remain

A promising start to the week, with stock markets making healthy gains as investors look favourably on Trump’s health updates and the ongoing stimulus talks in Congress.

While both of these would obviously be good news, there are still massive downside risks as far as the election and fiscal stimulus is concerned. Postal voting is going to cause a lot of confusion and disruption, in the best case scenario, while Congress still remains far apart on a stimulus bill and a compromise before the election is far from assured.

With just over four weeks to go until the election, I struggle to get too excited about days like today. I’ve been overly cautious in the past and could be falling into the same trap again but the downside risks for the coming weeks seem significant and investors may not look as favourably on a Biden victory as they are letting on, especially if the Democrats take the Senate. Higher taxes and more regulation aren’t market friendly, although massive stimulus packages are useful.

The downside risks aren’t just consigned to the US either, far from it. The UK is currently heading for a no-deal Brexit – although I remain optimistic a last minute compromise will be found – while Europe is seeing a worrying surge in Covid cases and current restrictions are proving sufficient. I struggle to not see more on the horizon which poses another threat to the economic recovery.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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