Trump and Biden risk stock market crisis as election ‘to spark plunge in finance sector’

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The US election is currently on a knife edge, with pollsters unable to predict who will become the next US President, despite previous forecasts that Mr Biden was an overwhelming favourite. With the result still too close to call, thanks to Mr Trump’s surprising surge within a number of key demographics such as Hispanic voters, the race could be set to rumble on for days – or even weeks. Depending on the outcome, many experts have claimed that Mr Trump could launch a legal bid, after previously casting a shadow over the validity of the election.

Previous comments from Mr Trump have suggested that he may be reluctant to hand over power to Mr Biden, while he also claimed that mail ballots had been manipulated, with postal votes being sent to Democrat areas, as opposed to his Republican locations.

And in a tweet today, he claimed people are “trying to steal the election”.

The close-run nature of the 2020 presidential race shows signs of a similar campaign that saw the US plunged into chaos as it was unable to confirm a winner 20 years ago.

At the time, Al Gore and George W. Bush were both in the running, with the latter eventually winning 36 days after the final votes were cast.

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This saw the stock markets take a major hit for around three weeks, with throwback reports showing “volatility for the S&P 500, which fell by 7.8 percent” after votes were cast until the year ended.

Although many are optimistic that a similar fall in the markets will not happen this time around, one expert issued a stark warning that Mr Trump’s next actions could cause chaos within the financial sector.

Greg Valliere, a chief US policy strategist, argued that in 2000, unlike today, “there wasn’t widespread unrest in the country”.

He added: “This time, there is a risk that protests could get out of control.

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“Mr Trump has made it clear that he would challenge any result that he disagrees with… Gore conceded because that was the right thing to do.

“If it’s shown that Mr Trump actually lost, I’m not persuaded he would be a good loser.”

In 2000, the main sticking point was over who was the winner of the hotly contested Florida state, which Mr Trump is expected to win this year.

It is one of many key swing states that prospective candidates target as they look to bolster their electoral vote numbers by 29, in their bid to get past the 270 mark needed to get into the White House.

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This year, Mr Trump currently holds a lead in the area of around 200,000 votes – but 20 years ago the vote in Florida – which has an estimated population of nearly 22 million, couldn’t be closer.

Eventually, after numerous recounts, Mr Bush would claim the win by just 537 votes.

Mr Gore had initially conceded the state, but after it emerged that the vote was too close to call, he retracted his concession.

Reflecting on the impact of the markets at the time, Russ Mould, investment director at AJ Bell, recalled how during the 36 days of waiting for an announcement “stocks slumped in the US and worldwide”.

Speaking in 2016, he explained:” The prospect of a contested election rekindles uncomfortable memories of the 2000 presidential election, which was followed by strong performance from commodities, the US dollar and bonds as the ballot was only decided by the Supreme Court after a month’s intense debate over the decisive vote in Florida.”

He then warned at the time: “If the 2016 election is contested – and this is by no means certain – investors must be wary of the reflex temptation to buy on any dip and do their research to ensure the underlying fundamentals of the US equity market remain sound, even if the example offered by the UK’s referendum vote in June is a potentially encouraging one.”

Despite it initially being viewed as the election being won by a Mr Biden landslide, firms such as LPL Financial warned its clients over what could happen should a legal challenge be launched by either candidate.

The company added that should the announcement of the winner go past two weeks, “uncertainty would almost certainly create a legally contested election that’s more serious than a recount”.

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