Dow, S&P all saw losses but do you think this is largely a knee-jerk reaction that we are witnessing? The United States as usual is not isolated. We have seen Germany, France all of them losing 0.5-0.8%. It is basically a sea of red for all the equity markets that are open. But do you just see this as a knee-jerk reaction with not much in terms of more medium-term ramifications for the equity markets worldwide?
I think it is very temporary indeed. I mean there are all sorts of narratives that come from this particular story but I think the overall impact is likely to be relatively limited. Politically, it is quite a sensitive time for Biden because he has got to be very careful that he does not spur any form of sympathy vote for Trump by being too aggressive. He wants him to lose because after the debate, we saw the other day that Biden was ahead. He had Trump on the ropes and this for Trump is the bell.
Markets are still uncertain about whether a Trump victory or Biden victory would be good for share prices or bond prices because we do not really know what policy either of them are going to come up with. So I think the bond markets are still in this position of uncertainty of not really knowing just as they were 24 hours ago. And I think, the mere fact that the markets are down 1% is an indication that there is not really much out there and that the sentiment has gone much worse. If we are looking at 5% falls, then that will be significant. But I think the kind of falls that we are seeing at the moment are nothing more than what you see on a quiet Friday.
Do you see that this could be a trigger for some more buying in safe haven assets? Recently, we had seen a bump up come by in the dollar index. Gold, of course, was relatively a bit quiet because of the whole move in the dollar. But do you believe that this would perhaps also cause a larger frenzy in the safe haven assets?
I do not think we are going to see a frenzy because again at the moment, we are not seeing enormous amounts of new uncertainty. We have had uncertainty in the system anyway with the election coming through. There is not really that much more uncertainty unless Trump takes a very strong turn for the worse and that is probably unlikely. So I do not really see markets pouring into safe haven assets. We are not at that stage yet.
The dollar has seen a reasonably volatile year compared to what it has been. It is not just the one way bet anymore. People have realised that the dollar can go down as well as up but that was probably inevitable anyway because the dollar has been very strong.
So I do not see an awful lot happening at the moment unless we see some significant changes in what is happening in the economy. That may well happen as protection for jobs and protection for companies is lifted in western markets, in which case we may see a big rise in unemployment. That is probably the next big hurdle we have to face.