Final Debate Recap: Top Three Trading Takeaways from a More Civil Conversation

See our top 3 takeaways from last night's final Presidential debate, including why it may be too little, too late to shift the race meaningfully...

US Election

Final Debate Recap: Top Three Trading Takeaways from a More Civil Conversation

After the first debate, which we characterized as “chaotic, disorienting, and frankly depressing” in our recap article, expectations were exceptionally low heading into last night’s second and final debate. Thankfully, the debate was able to exceed those low expectations, with moderator Kristen Welker’s ability to mute the candidates’ mics playing a big role in promoting more substantive policy discussions.

Our top three trading takeaways from the debate follow:

1)     Trump Was Notably More Restrained…And Dare We Say, “Presidential”

The consensus view among Trump advisers following the first debate was that he should dial back his aggressive interruptions, and it showed. At one point, Trump even complemented Welker, telling her that he approved of her performance after calling her “terrible and unfair” on twitter earlier in the week. The more civil debate, on both sides, allowed for more substantive policy debates around COVID-19, race relations, national security, and climate change.

2)     COVID-19 vs. The Economy

For traders, the first topic was perhaps the most relevant. President Trump consistently characterized the US’s management of the pandemic as a balancing act between managing the virus and keeping the economy running. "We can't close our nation," Trump said. "We can't lock ourselves up in a basement like Joe does." By contrast, Biden implied that managing the pandemic should be the clear number one priority, and that the economy would not recover until COVID was under control, predicting a “Dark Winter” for this year.

Reading between the lines, a Trump victory in two weeks’ time would validate the President’s management of the pandemic and point to an earlier attempt to “return to normal” whereas a Biden victory would probably feature more restrictions on economic activity while the country prioritizes public health. We’ll never know for certain which strategy will ultimately prove “optimal,” but there’s no denying that Trump’s approach is more heavily “leaveraged” to the development of an effective vaccine sooner rather than later; if we get that and a Trump presidency earlier in 2021, economic growth could accelerate rapidly as consumers open the floodgates after a year of pent-up demand.

3)     It May Be Too Late to Shift the Race Meaningfully

Academic research suggests that, with just a handful of prominent exceptions (Nixon looking gaunt and sweaty in 1960 comes to mind), debates rarely move the race in any substantial, sustainable way. This phenomenon is likely to be especially true this year, with two candidates that have spent decades in the public eye and 50M votes already cast (fully 36% of the 138M votes cast in 2016); in other words, everyone is intimately familiar with Trump and Biden already, so there are far fewer undecided or swing voters than usual.

Combine that dynamic with the lack of major gaffes or “zingers” that will last beyond this news cycle, and the state of the race is likely to remain roughly the same: Biden has a commanding, but not insurmountable, lead in the polls. If Trump wants to win another term as President, he’ll have to pull another, bigger rabbit out of the hat than he did in 2016.

Markets seemingly agree with this take, with little in the way of major moves throughout the debate. Stay tuned next week for the final stretch of our election coverage, including articles on what’s priced in to markets, the final state of the race, and an hour-by-hour election “gameplan” with key states and markets to watch!


More from Election

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.