Markets Weekly: Nasdaq 100, Gold, US Dollar, Crude Oil, All Eyes on Election

On average, the Dow Jones, S&P 500 and Nasdaq 100 suffered their worst week in over 7 months ahead of the US Presidential Election. This is as the VIX ‘fear gauge’ spiked the most since June over the same period. Rising volatility and a premium for safety propelled the anti-risk US Dollar and Japanese Yen. Anti-fiat gold prices suffered.

A combination of rising Covid-19 cases, an erosion of US fiscal stimulus hopes and a contested election have likely worked together to deteriorate risk appetite. The sentiment-linked Australian and New Zealand Dollars underperformed. Growth-linked crude oil prices declined the most since the middle of April.

All eyes turn to the November 3rd election as markets will try to digest what the outcome could mean for another fiscal package. The Senate adjourned for recess this past Monday until perhaps November 9th. Without its blessing, policymakers won’t be able to get a package through. This is complicated by the unknown timeline of when the outcome of the election could be understood.

Another key event will be November’s FOMC monetary policy announcement. No changes are anticipated in benchmark lending rates or in the pace of asset purchases. The Fed has been reiterating concern over a lack of progress in fiscal stimulus in recent weeks. Traders may watch for any commentary around whether or not the central bank could step in more to support growth.

October’s non-farm payrolls report may show a slowing pace of job gains since the extra unemployment benefits of the $2.2 trillion CARES Act expired and a second one pending. Rising coronavirus cases have resulted in lockdowns being reintroduced, particularly in Europe. Brexit talks also continue. What else is in store for markets in what is expected to be a volatile week?

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