RALEIGH — President Donald Trump’s positive virus test, just 32 days out from election day, has injected a new level of uncertainty into the financial markets, and it’s got some economists scratching their heads.
“My first reaction was could 2020 get any crazier,” said Kenan Institute Executive Director Professor Greg Brown in a video call on Thursday midday. “Just when you thought you had hit the limit, something new happens. My first thought was more on just what it’s going to do to the election because you can imagine a range of outcomes.”
Indeed, major US stock indexes were mostly lower in afternoon trading, as investors weighed the President’s diagnosis and a weaker-than-expected employment report.
US stocks had fallen as much as 1.5% heading into the open of trading Friday, but by midday, performance was mixed and varied widely by sector.
“My guess is that the market was more concerned about the employment report today than about Trump’s diagnosis,” Brown opined. “Certainly it could take a turn for the worse. I mean, frankly, I think first and foremost right now on the market is generally what’s happening with the pandemic, how it’s evolving, how close we are to a vaccine, and how quickly we’re going to be able to roll it out.”
Dr. Michael Walden, NC State’s economist, remains wary and said the long-term impact could be damaging.
“This was shocking news. Initial reactions have been negative,” he said. “In times of uncertainty, people slow their spending and investing and focus on safety. Hence, with the President being tested positive for Covid-19, more people will likely be reluctant to interact publicly – for, example, by shopping less and eating out less – and this will hurt the economic recovery by curtailing hiring. Investors will focus more on safety, which means less money being put in the stock market and the likelihood for drops in stock indices. This hurts retirement savings.”
He said these adverse effects could be moderated if the President continues to be asymptomatic; makes virtual appearances to show the world he continues to function; and progresses well through the quarantine period and is ready to participate in the next presidential debate.
“In other words, the country will be calmed if normalcy occurs,” he said.
He even went so far to compare this moment to the attempted assassination of President Reagan in 1981.
“There was uncertainty for several days until it was clear President Reagan was recovering fully from the surgery to remove one of the bullets,” he said.