Coming: The Chaos Election

Equities at new highs mean Mr. Market is expecting Trump to win in November, with four more years of Trumponomics. The term structure of futures-implied forward S&P 500 volatility jumps around election day and doesn’t return to today’s levels even by March. We think this reflects the fear that widespread balloting by mail will lead to tabulation delays, fraud and possible litigation which, if in a decisive battleground state, could delay the general election result for many weeks. Rhetoric from both parties is conditioning the battlefield to delegitimize the election before it occurs. Meanwhile, post-convention polling and prediction markets show Biden’s edge narrowing, and our model has extended its forecast of a Trump win with revisions to Q2-2020 personal income.