The Democrats were leading with a 7 point advantage ahead of the contest, according to an NBC News/Wall Street Journal poll released Sunday.
“There’s a lot of headlines that investors are going to have to sift through this week ,” said Ryan Nauman, market strategist at Informa Financial Intelligence. “With everything going on, I expect more volatility” as we get closer to the election.
However, Nauman thinks the volatility should subside after the election. “After the last five midterms, markets have done pretty well after the elections.”
Investors are also grappling with uncertainty on the trade front. Stocks were hit with a wild bout of volatility during Friday’s trading session amid conflicting comments and reports on global trade. President Donald Trump’s economic advisor Larry Kudlow told CNBC there was “no massive movement to deal with China,” contradicting an earlier report that Trump had asked officials to prepare a draft for a U.S.-China trade deal.
On Monday, Chinese President Xi Jinping reiterated his rhetoric against protectionism and commitment to free trade in a speech. Xi said his country was pursuing “a new round of high-standard opening up” to broaden market access to the rest of the world.
Investors have been jittery since the start of the fourth quarter as worries about rising interest rates, slowing earnings growth and lingering trade fears have dented sentiment. The Cboe Volatility index, widely considered the best gauge of fear in the market, is up more than 60 percent this quarter.
“The stock market currently faces many challenges,” said Jim Paulsen, chief investment strategist at The Leuthold Group, in a note to clients. “But could it also lose its earnings story? … Indeed, if sales only rise 5% next year (more in line with nominal global GDP growth), even a very mild contraction in profit margins could shockingly cause earnings to fall.”
“Saying farewell to a trusted friend and guardian (solid profitability) is never easy, and if the numerous challenges listed above remain while earnings disappoint, the stock market may yet have further to fall,” Paulsen said.
contributed to this report.