More investors are now hedging themselves against something that could shock markets – mostly related to the US election outcome. Wall Street analysts have suggested that they are concerned for example of Elizabeth Warren being elected, in what some are calling a massive shock to the economy and a corresponding selloff in the US equity market. Some are even suggesting a collapse of 20% or more in the US S&P 500 and the Dow Jones Industrial Average.
Despite the recent US Nonfarms release of 226,000 for November, which points to a stronger economy, the election fears and potential economic impact are growing.
This is also being reflected in the purchases of downside puts – a structure that protects those equity longs – a means of selling stocks in a downfall in prices. These are “hedge” positions and the price of downside puts are increasing, which is way of measuring said concern for these markets. One Wall Street guru said that he puts the US recession level – or possibility – at 40% for 2020, but admitted it is decreasing from 6 months ago. i.e. the US economy is firming up and improving. Look for more articles on our platform that point to growing concerns in the US economy.