Retail Investors Brace for a Crash that won’t Happen
Many retail investors are preparing for an “inevitable” crash due to the election.
Take this post in the Facebook group “Day Trading Stocks & Options” for example. Nearly every commenter agreed that a crash was coming because of a Biden win, or because of a Trump win, or for whatever reason the commenter made up.
If an election crash was inevitable, it would have already happened. We saw a steady decline in equities over the last couple of weeks, and that is partly due to election fears and anxieties.
However, markets never crash the day of an election because of who is elected, especially when the democratic candidate is fairly moderate.
Markets price in the likelihood of who they think will win; there is zero chance investors all of the sudden dump their stocks if Biden wins.
The one “dark horse” scenario that could spell trouble is a contested election. This would definitely be bad for markets, but if anything, it would just be the catalyst for a selloff of overvalued securities.
In other words, markets won’t crash just because of the election, but a contested election may be the catalyst to begin a selloff that’s overdue.