Alreadyional level and there is a partisan battle over replacing Supreme Court Justice Ruth Bader ginsburg. It is not just traverse is bided. It is the senate, 10 seats now held by the gop that are considered competitive. The markets are volatile today but they could be for the rest of 2020. Like with theeem news about Ruth Bader Ginsburgs passing, election risks, front and center. Today, kind of an interesting day on the market. The cyclical areas. Banks having a weekday. Bank index down nearly 4 . One contributive factor could be the release of documents related to Money Laundering and so forth. Theirook on pace for worst year since 2008. A combination of the crash, the weak recovery, other issues. You can see, rough year continuing for the bank. Romaine a lot ofolks a focused on the possibility that u. S. Policy could change, specifically with regards to taxation. Spikes see the kind of we see are typically in election years. He saw a spike in 2008 during the first obama election. Again, during the 2012 election. That spike came a little bit earlier. Ist tax policy uncertain he almost all related to the fiscal stimulus. Up beforetainty crept the election concerns came in. Now, the question, who foots the bill for this, whether a Republican Administration or democratic administration, different approaches. Right now, the markets do not really seem to know which way it will go. Caroline we are still hearing from powell. It seems he is speaking all the time at the moment. Saying that the fed will do what it can for as long as it takes. He is remarking in testimony he will give tomorrow, himself and treasury secretary mnuchin on virtual capitol hill. He says, get the money into main street along with that lending program. Many Economic Indicators show improvement. Joe lets get more insights on the market, Political Risks. Katie, thanks for joining us. Like there were a lot of threads today. In your view, how much is Political Risk really starting to become one of the big things on the minds of traders and investors . I do not think it is yet showing up the day today. But, if you look under the hood, it is turning into a really interesting dynamic. The president ial election as the most dramatic event ever on vix futures, but now you are seeing beyond just november 3, as investors grow more and more worried about a contested election. Tick has been a noticeable around election date. Thatow you are seeing curve flattening out. The whole calculus is sort of upset by Supreme Court Justice Ruth Bader ginsburg said away. , that seat is not filled could and in a tie. Beyond just election day. Romaine we could see some skittishness definitely in the equity markets, not completely in credit markets yet. There seems to be a sense that the economy is in a relatively good place. As caroline was just saying, the fed does seem ready to continue to support markets and the economy as long as it can. Katie credit markets are one of the most interesting to look at right now because they are not really doing much. They barely budged this month. Typically, you would expect to see those two move together. Itis still a risk asset and tends to move alongside moves in stocks. Now,are holding firm right though spreads. The selloff is not being driven just by change in outlook or economic outlook, more about technicals in the stock market. Iswe all know, stock overvalued at the moment. There is a program overnight that drags down initially. Reboundernoons certainly supports the theory that it is probably not that fundamental in nature. Caroline to a certain degree, what are you hearing from analyst notes the impact again and again about how long volatility could last. Seen very you have little the trading range has been very narrow. When you look at what u. S. Treasuries are up to. Goldman sachs saying, you will see ranges of price swings intolly pushed out december. Katie more and more of that. When we start to see contracts exist for the november 3. You could see election volatility sort of post volatility into year end. We are not just dealing with november 3. Are dealing with the lady of contested election, delayed result. Theave the pandemic and progress of a vaccine. Still, the past author so, noticeable just around the election. Bloomberg cross assets reporter katie cranfield, talking about those vix contracts in october and november. We will talk about this more about the market is pricing in volatility. Us inhave michael joining a moment to break it down. This is bloomberg. Romaine today, we are focused on the identity election risk and the heightened election risk. The makeup of the house and the senate could actually have bigger implications. Watcherst of market increasingly watching the senate. There are many ways it can go. Bided or trump. But also, there could be a huge policy gap between if biden has a Democratic Senate and presumably democratic house, bisus a bite in versus a den win and he does not. Stimulus now versus january, it is a huge question and it would depend on the makeup of congress. From the a tax analyst Wharton School talked about people earning 400,000 and above, if you are seeing a democratic sweep, that could be about 20 higher taxes. What does that mean for investors . What does that mean for Wealth Distribution as well, which some might see as a positive spin. What market watchers should be watching in the senate. 3, howture, november much will the senate be part of the story at least in terms of the pure market perspective . I think the general thinking among most analysts is that the house will remain under democratic control. In the senate, we have 35 senators up for election. For biden and the democrats could shift that control. Like you said, the focus will be on a couple of things. Preventedm that has the final Stimulus Program from being passed. Of thets take control senate, maintain control of the house, control the white house with a biden victory, that we will see a stimulus package very early on in the term, say written up in january, past as early as february. They expect it would be focused largely on green energy, aid for , other schools interested parties that have in the been left behind havoc. That is in a sort of socalled blue sweep the question, what would it mean for taxes. It is interesting. Some of the analysts we talked to said if the democrats do win enough seats to take control of the senate, chances are that some of the ones who win in those republican states will be way more moderate than you would expect. They are thinking that any sort of stimulus Infrastructure Spending would be not necessarily a tax increase right away. They dont expect that necessarily for the stimulus to be financed exclusively through tax increases. Romaine i know that the makeup matters. For the past eight years or so, you have had a narrow majority in either the house or senate. Not a whole lot has gotten done. When you talk about things that congress has to sign off on, get witharely the majority being so narrow, that you would really not get much of a change in anything in the coming years whether trump or biden was in office. Michael a lot of that comes down to whether the Controlling Party wants to change the rules about the filibuster. Right now, the 60 vote majority end thatnate to debate, to end the filibuster. Some say that maybe if democrats get the majority, they would change does filibuster rules. Nobody really expects such a strong showing for the democrats to get 60 votes in the senate. It is really going to be a narrow majority if they win a majority at all. This will be a prime focus. We dont know what the makeup of the senate will be. We have not heard a lot of the candidates positions. To eliminate that 60 vote requirement, then obviously the democratic agenda would be a lot easier to pass. Especially if youre talking about some of the moderates might not toe the party line every time. Be anhis will increasingly important subplot to watch over the next several weeks coming up, we will talk about how uncertainty over the Supreme Court also contributes to risk. This is bloomberg. Focused today, we are on the increasing election risks right here in the u. S. Friday, we had the passing of Supreme Court Justice Ruth Bader ginsburg. To that, we have to look into what uncertainty this creates. What that means in terms of washington, what sort of gridlock that tilts into the system, in particular of any of any fiscal stimulus. Themselvesw girding for volatility past november. Joe prior to this, there was no question that this was an extraordinary moment for volatility pricing. Adds to the ways in which will be several weeks extraordinary. Up. Uch uncertainty building you expect that to last for quite a while. The news of that on friday night makes the next several weeks so much harder to anticipate the direction this country goes. Romaine it will be interesting to see what that chart will look like when you start factoring in january as well. It for more, lets welcome the founder and ceo of dell back lets bring in michael pervus. The passing of a Supreme Court justice not necessarily always a market thing to say. What is the first order affect from your view . Michael i think the first thing that comes to mind, the phase four, from this summer, that was supposed to be done already. Those talks were disintegrating before passed up disintegrating for rbgs on friday. Disintegrating friday. Bg passed on i think what you see today is some of the most sensitive Asset Classes really taking it on the chin. Thats been my contention stocks like apple, amazon, and so forth, will be able to plot q4 better than most other stocks. Of ruth a second facet Bader Ginsburgs departure as it relates to the markets. I think trump already reflected on this. The concept of a contested election seems to be increasing. You were just discussing the vix curve. Forg elevated premium october, november, and i think it is starting to bleed into december contracts as well. Caroline it is really interesting, you make certain with theke impressed way they were able to weather the storm what about the u. S. Dollar . Havenst seemed to be a trade but often, it is not. Michael that is a great question. That a contested election, almost a preforecasted contested election unlike gore versus bush , dollar weakening. I think a lot of this comes back thehe Euro Weakness today, euro had this great run, we have had this condition where we have in covidpersistence cases in europe, disturbing statistics on the covid front, yet the fiscal stimulus to go along with that has sort of helped the market. We had this big paneuropean stimulus that has been cobbled together. It looks like those checks are still clear until 2021. You have this condition where heightened covid risk the to assetis priced in classes, then you have this big move today. It is an interesting discussion for q4, which asset class takes it on the most takes it on the chin the most if we have this contested election. Gold dering whether performer be a better to get through this mess. Priced into this higher vix curve, higher premium. Stocks wille tech be in a contested election, i am skeptical about that, especially if they are being presold right now. Romaine we did just get prepared testimony for powell before his hearing tomorrow. It generally reiterated the idea that the fed will do whatever it takes to keep things moving here. Also, the idea that there is some improvement in Economic Indicators. Can investors may be take a little bit of solace in that the fed will be a little bit more of a consistent factor for the next few months if not years . Michael absolutely. The fed has been nothing if not consistent. Lower yields come also yield volatility. Things,he troublesome helping keep asset prices arguably, he is also helping to facilitate the kind of dialogue, the second order of impact. Youre absolutely right that there is no question that when you have the most important security in the world, the 10 year treasury note, being anchored as it is, that is very constructive, and they can bow through political issues with that background. Caroline always great to get your thoughts, your notes, and your voice on the show. We thank you for the time. That is all from whatd you miss . Romaine this is bloomberg. Emily welcome to bloomberg technology. Stocks trimming their losses with a rebound in some tech shares. The erosion of a new partisan battle over the eruption of a new partisan battle over replacing the late Supreme Court Justice Ruth Bader ginsburg. President trump
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