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The U.S. presidential election ends tomorrow; we’ll see results filter in throughout Tuesday’s trading session.
Algorithms will be making judgements as to which markets and stocks will benefit from a Trump or Harris victory. For us mere humans, the outlook as to who will take the reins from President Biden is cloudy, but we need to keep tabs on the outlook for volatility.
I think the best, most helpful way to look at these expectations is to view the situation like one big earnings statement.
One of the most predictable elements of a post-earnings move is what volatility will do. Short-term volatility is initially high and back-month volatility is relatively low. After the event, short-term volatility gets crushed and we start to see a normal structure, with volatility rising over time.
So let’s take a look at the volatility picture as it stands today, and see what the volatility markets are telling us about the election.
