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Why investors are ignoring Trump's boasts that he would not transfer power if he loses election

Brian Sozzi
·4-min read

Don’t sweat President Trump’s boasts that he wouldn’t peacefully transfer power if he were to lose the election, say top market strategists.

Even so, that doesn’t make it any easier for the average American to digest Trump’s proclamations on the subject right now or for the average investor to prepare for the great Election Day unknown that is the 45th president of the United States.

“We want to make sure that the election is honest, and I’m not sure that it can be,” Trump told reporters on Thursday. The comments came a day after Trump declined to say at a White House press briefing that he would commit to a peaceful transfer of power to challenger Joe Biden should the former U.S. vice president win. Trump continues to cast doubt on the fairness of mail-in voting and the entire election process, something he has done for years.

Republicans and Democrats were quick to rebuke the president’s comments on Thursday.

President Donald Trump speaks during a campaign rally at Cecil Airport, Thursday, Sept. 24, 2020, in Jacksonville, Fla. (AP Photo/Evan Vucci)
President Donald Trump speaks during a campaign rally at Cecil Airport, Thursday, Sept. 24, 2020, in Jacksonville, Fla. (AP Photo/Evan Vucci)

“The winner of the November 3rd election will be inaugurated on January 20th. There will be an orderly transition just as there has been every four years since 1792," Senate Majority leader Mitch McConnell said in a tweet.

By and large, major stock indices have ignored Trump’s comments on the matter this week. But make no mistake, the claims inject a fresh risk into markets already growing concerned about looming election.

Here is what several investing pros told Yahoo Finance’s The First Trade about Trump’s latest eye-opening claims and the potential for a contested election.

Brian Gardner, director of research at KBW

“I think in some way, shape, or form we’re likely to have a contested outcome. I think there are a number of states that will be close. The mail-in ballot and the logistics and the time it takes to count ballots will prevent services in states from declaring winners immediately.

So there is some level of chaos that is likely to play through following the election. The Trump comments themselves I don’t think investors are paying too much attention to them. Remember, he made those comments initially on Wednesday night Republicans without naming the president directly rebuffed him and said there will be a peaceful transfer of power on January 20 regardless.

I think investors are kind of used to that.”

Amanda Agati, chief investment officer at PNC Financial Services

“It’s disturbing on a personal note, let me just say that. It’s not the kind of rhetoric that makes anybody feel good or have a high conviction or point of view [on stocks], at least over the short-run. I think, actually, investors are starting to price in the significant uncertainty and the potential we won’t know the results on election night.

If you look at VIX futures [volatility futures], we have been fixated on the election model which has been elevated much more so than the last two election cycles — so much higher than in 2016 and even 2012. What is more concerning now is the following month is even more significantly elevated. When you look out to March 2021 and the VIX futures contract, it’s all the way above 30.

So I don’t know if we’re going to make significant changes for our own client base in terms of portfolio positioning. I think we are pretty comfortable.”

Noah Hamman, AdvisorShares CEO

“[Trump’s comments] will make it challenging [for investors]. It will increase volatility. I am not actually too worried about what he says. This isn’t the first controversial thing he has said. He is good at attracting attention. I am less worried. I think everyone wants to see how things will work out and hopefully, it’s not so complicated. I hope there’s not a challenge and it doesn’t go to the Supreme Court. But people and investors are bracing for volatility.

[This] is in part why we are suggesting to get your portfolio ready now for the election. Look at cash, maybe even look at hedging your portfolio with short equities because it could be a risk. I would say headline risk, don’t worry about that.”

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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