Do the debates matter to the market?

Free After-Hours Analysis: 

It was a very mediocre day for the S&P 500 with prices slipping 0.5%. That said, 0.5% isn’t a big deal given the elevated volatility we’ve been living under since the beginning of September. Considering the widespread nervousness, “only” falling 0.5% could even be called a good day. That said, we need to see a few more resilient days like this to feel more comfortable about the floor under our feet. Overbought markets tumble quickly. If we are still at these levels by Friday, we can start to put a little more faith in these prices.

The big bogie between now and Friday is tonight’s presidential debate. How will this affect the market? The simplest answer is, it won’t. There are a couple of reasons why.

Let’s start with the fact this is a very polarized election. Most peoples’ minds are already made up and nothing that happens tonight will change who they vote for. Crash or soar, it won’t really make a difference for Biden or Trump. The people that loved them yesterday will love them tomorrow and those that hated them yesterday will still hate them tomorrow.

Second, the few people that haven’t made up their minds are clearly not paying attention to politics. If they don’t care enough to have an option, they almost certainly won’t care enough to be watching tonight’s debate (and most likely won’t even vote). I wouldn’t pay much attention to this group.

And finally, the market doesn’t really care about these intermediate points. A good debate by one or the other won’t create a lasting impact on the market because the market doesn’t care about debate performances, only who wins in November. As I already stated, very little can happen tonight to change the course of the election and it won’t affect the market in a meaningful way tomorrow.

That said, maybe we get a knee-jerk Wednesday morning if one candidate screws up badly. But expect that early move to fizzle and be forgotten by tomorrow afternoon. Unless someone commits the unforgivable gaffe of all gaffes, ignore the debate. Expect investors to go back to obsessing over their fear of heights a few hours after the open.

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