Markets thrive on predictability, yet the week of November 4th is laden with uncertainties that the market is having a hard time parsing. This heightened uncertainty has pushed the VIX index up by 24% over the past month, despite the NASDAQ’s gain of more than 1% during the same period. The election on November 5th coupled with the Federal Reserve’s announcement two days later is creating a murky landscape for market participants.
Since Harris joined the ticket in place of Biden, the presidential election has been tightly contested, becoming even more so as Election Day approaches. According to The New York Times polling averages, a candidate leads by less than one percent in five out of seven swing states, which is well within the margin of error. Control of both the Senate and House also remains uncertain, with no clear favorite. Although it is slightly more probable that Republicans might gain control of Congress and the White House, Democrats still have a considerable chance to win the election. Markets tend to be volatile before elections because of the unknowns of a presidential election, but markets typically have a better grasp on eventual government control at this stage of an election. The increased uncertainty of the election could be leading to increased volatility in markets.
Adding to the uncertainty, the Federal Reserve will have an FOMC meeting during the same week as the election. This abnormal situation is likely to cause greater market fluctuations than a typical election period. Investors should anticipate market volatility leading up to both the election and the FOMC announcement. Markets will be volatile in the short term, but don’t let that affect your long-term positioning.
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This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.
Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices does not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
The VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30-day period.
The Nasdaq Composite Index is a market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks. The index includes all Nasdaq listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debentures.
