The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Guessing Expectations

06/24/2020

On Wall Street, the favorite game is guessing what outcome is already “priced-into-the-market.”  It is a game of guessing expectations.  For example, I think the stock market currently expects Trump to lose the Presidency, while Republicans hold onto the Senate.  Remember, Wall Street always over-reacts to surprises!

If the Senate remains Republican, the Trump tax cut remains safe, but that is already priced-into-the-market.  So the market just shrugs it off.
If the Senate changes hands after the November election, the stock market will be unpleasantly surprised and drop, at least in the short term.
If the President retains the White House, the stock market will be pleasantly surprised and rise, at least in the short term.

That’s assuming . . . the election was held today.

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