[Good Morning Stock Market] US Presidential Election One Month Away... "Increased Sensitivity in Financial Markets"

Donald Trump, President of the United States, is working in the presidential suite at Walter Reed National Military Medical Center in Bethesda, Maryland, where he was admitted due to COVID-19 on the 3rd (local time). (Photo by AP)

[Asia Economy Reporter Kum Boryeong] With the U.S. presidential election just a month away, the sensitivity of the financial markets is increasing. Analysts say that the short-term volatility of the market has expanded due to the first presidential debate and its results, as well as U.S. President Donald Trump's confirmed diagnosis of COVID-19. Meanwhile, expectations for additional stimulus measures, which were the hottest topic in the U.S. stock market during the recent Chuseok holiday, still remain.

◆ Seunghoon Lee, Meritz Securities Researcher = It is clearly under the influence of the U.S. presidential election. As the 2020 U.S. presidential election, specifically the Electoral College vote, approaches within a month, the financial market's sensitivity to the election is rising. The short-term market volatility that expanded following the first presidential debate on the 29th of last month and Trump's COVID-19 diagnosis on the 2nd is thought to be in the same context.

According to polls, Biden appears to have secured a definite lead. Biden and the Democratic Party hold an advantage in all surveys. As of the 2nd, Biden's approval rating stands at 50.6%, leading President Trump, who is at 42.5%, by more than 8 percentage points. Although Trump's approval rating recovered to 43% in late September, it has faltered again following the presidential debate and his illness.

However, it is difficult to conclude Biden's victory based solely on poll results. We witnessed in the 2016 election that Democratic candidate Hillary Clinton was ahead of then-Republican candidate Trump in the polls but lost the election.

If Trump is re-elected, there is a possibility of frequent financial market volatility due to intensified conflicts with China. Biden may appear more moderate on the surface compared to Trump, but his passive stance on direct engagement with China leaves room for uncertainty in future China-related strategies amid China's rise.

We believe that if Biden is elected president, the likelihood of him immediately targeting or regulating tech companies is limited. The priority is U.S. economic recovery, and if competition with China remains valid, these companies will initially play a vanguard role. However, once the U.S. economy is back on track, there is a possibility that Biden's approach will differ from Trump's deregulatory stance. Considering this, from the perspective of big tech and leading stocks in the stock market, Trump's agenda may be relatively more favorable.

◆ Sangyoung Seo, Kiwoom Securities Researcher = The U.S. stock market rose as economic indicators improved and Trump's health recovery and possible discharge on Monday were highlighted. Trump claimed his good health through numerous tweets starting Monday morning. Additionally, the announcement that he would be discharged at 6:30 PM on Monday positively influenced the stock market.

Meanwhile, following Trump's COVID-19 diagnosis, Biden's strength in the polls has become more pronounced. Biden's chances of winning are at 59.7%, compared to Trump's 36.0%, and the possibility of a Democratic victory in the Senate election has risen significantly to 64.8%. This indicates a higher likelihood of the Democrats controlling both Congress and the executive branch, which could accelerate the implementation of Democratic policies. Expectations for expanded fiscal policies such as infrastructure investment have increased, leading to strength in sectors like steel, machinery, solar energy, and healthcare.

The topic of economic stimulus, which was the hottest issue in the U.S. stock market during the recent Chuseok holiday, also had a positive impact. On Monday, House Speaker Pelosi and Treasury Secretary Mnuchin negotiated for an hour but failed to reach an agreement, with talks expected to resume on Tuesday. However, reports of progress toward an agreement emerged as specific proposals and related documents were exchanged, driving the U.S. stock market higher.

Of course, the Republican-controlled Senate continues to criticize excessive stimulus measures, arguing they negatively affect the job market, leaving uncertainty about actual passage. Nevertheless, the stock market continued to rise, reflecting expectations that the stimulus package will be passed soon.