Today the markets are still reeling from some of yesterday’s data. The most important reports from the previous days included a record decrease in US GDP in the second quarter of 2020 by 32.9% and a GDP price index of -2.1% instead of the forecasted 1.1%. In addition, continuing jobless claims were higher than expected, showing that the labor market in the US is recovering too slowly.
The flood of fundamental reports continues today. Starting in Asia, Japan’s unemployment rate was lower than forecasted at 2.8%. Next, China reported a manufacturing PMI of 51.1, better than anticipated. The number over 50 shows the Chinese economy is growing again.
Europe also beat most of the forecasts, with retail sales in Germany, housing prices in the UK, and inflation in France all coming in better than expected. When looking at data for the eurozone as a whole, inflation exceeded investors’ expectations as well, but the GDP report showed a slightly lower dip than anticipated at -12.1%.
In addition, the upcoming presidential election in the United States is now beginning to have a stronger impact on the financial markets, particularly where equities are concerned.
Yesterday President Trump tweeted that he did not trust mail-in votes. However, remote voting is likely to comprise a huge chunk of the votes this year due to the coronavirus pandemic. Many people are under quarantine or are voluntarily opting out of visiting crowded public spaces, while some cities are still in a state of lockdown.
Experts are now concerned that Donald Trump, who is lagging behind in all relevant polls, will use the mail-in vote as a way to challenge the election results and might even refuse to step down as President, even if he loses the election.
Matters are only made worse by the fact that early on in 2020 there were lots of issues with proper vote counting in the preliminary elections for a Democrat nominee. It is likely that, unless the pandemic is completely over by November, these issues will persist in the November elections and votes will take a very long time to be properly counted.
In the past, problems surrounding passing the presidency from one candidate to another have always resulted in increased market volatility and losses among all major US stock indices.
