Goldman Sachs Group Inc. stated international traders are overstating the chance that monetary markets can be plunged into uncertainty by the shortage of a transparent victor quickly after subsequent week’s US presidential election.
“While we recognize the tail risk possibilities, we think market participants appear to be somewhat overestimating the probability that a delayed result will prevent financial markets from reflecting the likely election outcome on election night or early the next morning,” Goldman’s Michael Cahill, Lexi Kanter and Alec Phillips wrote in a observe Tuesday.
Underpinning Goldman’s view is a variety of things. For one, tight state-level and nationwide polling is obscuring what’s more likely to be a wider margin of victory within the electoral school. For one more, modifications to how states course of ballots for the reason that pandemic ought to velocity alongside vote counting in contrast with 2020, the strategists stated.
Wanting on the final two elections as a information, Goldman discovered that many of the volatility in forex markets pops up simply because the preliminary vote tallies start coming in, through the Tokyo buying and selling session. The announcement of key county-level outcomes, quite than race calls, is a major driver of change charges as early outcomes are reported, the financial institution famous.
“In both 2016 and 2020, the vast majority of FX volatility occurred in the first few hours of the results,” the strategists wrote. “While volatility was still somewhat elevated in London trading hours, things generally returned to ‘normal’ by the NY afternoon the day after the election.”
