Morning Notes — Spoiler Events?

The 2020 presidential election is often mentioned as a risk factor for equities. Of the most frequently cited risk factors, we had it ranked third behind: 1) an abrupt end the US-China trade détente based on possible Congressional sanctions on China related to Hong Kong and; 2) China growth failing to stabilize at ~6%. In my experience, the frequently listed/commonly cited risk events rarely amount to much because the risk premium is baked into prices over time. That said, the results from next Monday’s Iowa caucus could take a few bps off the forward multiple over time if the Sander’s campaign wins by a significant margin. While the probability for any given candidate to win the general election might be low, it’s more important to recognize the probability based on polling data wouldn’t be zero. Investors perceived Ronald Reagan as an equity-friendly candidate during his 1984 run for reelection and despite an ultimate lopsided victory, the polling data vs Walter Mondale showed a fairly tight race.