Trump COVID-19 diagnosis casts shadow on rattled markets

President Trump’s contraction of the coronavirus is expected to cast a shadow on financial markets already rattled by a tumultuous election, a slowing economic recovery and a pandemic that has shown no signs of subsiding.

The initial market shock came on Friday morning after the president revealed that he and the first lady had both tested positive for COVID-19. The news jolted a stock market riddled with volatility following months of steady gains despite the coronavirus recession.

The recent up-and-down swings have been driven by rollercoaster stimulus talks on Capitol Hill, uncertainty surrounding the upcoming election and rising coronavirus cases across northern U.S. states and much of Europe.

Wall Street analysts say Trump’s diagnosis on its own is unlikely to upend markets, but how it’s handled could create more turbulence and possibly lead to a chaotic selloff.

“Surprise is what investors really hate,” Scott Clemons, chief investment strategist at investment bank Brown Brothers Harriman. “Uncertainty around the line of command would be something that will cause a lot of tribulation in markets.”

Trump’s announcement of his positive coronavirus test was the latest stunning development to shake up the presidential race and rattle the stock market, which the president has frequently touted as a measure of his economic accomplishments.

After months of playing down the danger of the virus and staging rallies against the advice of health officials, Trump has now been hospitalized as Democratic nominee Joe Biden holds smaller events in key swing states.

The unpredictable nature of the coronavirus and the potential implications of a seriously ill president raises a litany of concerns that initially shook financial markets.

The Dow Jones Industrial Average opened Friday with a loss of roughly 400 points, falling 1.4 percent. The S&P 500 index fell 1.6 percent and the Nasdaq composite fell 2 percent.

“The news came as a shock to investors and the uncertainty of what lay next was quickly priced into markets,” wrote Peter Essele, head of portfolio management for Commonwealth Financial Network, in a research note.

“It seems reasonable to assume that markets will be on shaky ground throughout October with the perfect storm of a highly contentious election and a pandemic that remains stubbornly at the forefront,” he added.

While Trump’s health injected a new level of volatility into the stock market Friday morning, investors shook off much of the initial losses by the closing bell. The Dow finished the day with a loss of 134 points and the S&P closed down roughly 1 percent as the ongoing selloff of technology stocks cost the Nasdaq 2.2 percent.

Wall Street experts say the general chaos of the past month and Biden’s growing lead in national and swing-state polls has inoculated the market to some extent.

Daniel Alpert, managing partner at investment firm Westwood Capital, said investors have already begun shuffling their bets to prepare for a Biden presidency preceded by political unrest.

“The market is priced to a level of instability after the election that will take several days to manifest itself,” Alpert said.

“That’s not to say that the market won’t dump 3,000 points because some guys are running around with machine guns. It very well might, but I don’t believe that that’s the high likelihood outcome. Therefore, the market doesn’t feel the need to sell off right now.”

Clemons, of Brown Brothers Harriman, suggested Trump’s diagnosis was predictable given the state of affairs in 2020.

“This is just the latest in a litany of political news flow,” he said. “This is just one more piece of the narrative, and I think for most people it’s a rather predictable development as well.”