After the first round of presidential debate, we commented on the suggestion that we should continue to pay attention to "October Surprise" in the first round of presidential debate, and the first "black swan" of the election had already appeared.

At around 1 p.m. Beijing time on Oct. 2, President Trump himself said via Twitter that he and the first lady had tested positive and would begin self-quarantine; his doctor later issued a statement confirming the situation. After the news was announced, the market reacted strongly. Us stock Nasdaq pre-market futures fell more than 2%. Interest rates on the US dollar and US bonds weakened slightly, and gold rose to 1910 US dollars per ounce. In addition, betting odds on Biden and Vice President Pence rose slightly, while Trump fell to around 36%.

With just a month to go before polling day on November 3, the sudden emergence of this incident has added a lot of uncertainty to the evolution of the future path of the general election, including the second round of presidential debate originally scheduled for October 15, campaign arrangements in the coming weeks, policy advances, and even in extreme cases, the final election is likely to be affected.

The information available is not enough to help us make an accurate judgment, and it is entirely possible that, in retrospect, the final result will not have much impact on the general election and the market; but what is certain is that this will lead to a further increase in the uncertainty of the path, that is, an increase in the odds of volatility or the choice of different situations.

If we assume that the current diagnosis is correct, we can deduce the future evolution for investors' reference. Specifically,

►First of all, assuming that the current test results are correct, in any case, the campaign schedule will inevitably be affected for some time to come.If calculated on the basis of the 14-day isolation period, the second round of presidential debate to be held in Miami on October 15 will hardly be held as scheduled, and it is not clear whether the vice presidential debate originally scheduled for the 7th will be affected.

In addition, Trump will not be able to hold intensive campaign rallies in several key swing states, such as Florida, Wisconsin and Arizona, in the coming days. Given that Trump still lags behind in the national polls, especially in the key swing states, the quarantine will inevitably have an impact on the campaign and even the campaign.

►Second, because it is too close to polling day and time-sensitive, the severity of President Trump's illness and the speed of recovery are key.

1) if the illness is not serious, can still exercise presidential functions, and is cured after a period of isolation and treatment, then the overall impact will not be significant.It may be limited to being unable to participate in a series of campaign events in the short term; and even its infected and cured image may even benefit it politically, similar to the previous situation in which British Prime Minister Johnson and Brazilian President Bosonaro were infected and then recovered.

2) but if the symptoms are severe, take a long time to recover, make it impossible to perform presidential functions in the short term, or even affect the ability to run in the final election, it will lead to greater and longer-term uncertainty.

On the whole, the severity of the second round of health events in the United States and Europe is higher than that in the United States and Europe.3~4The first round of the month is much lower.The proportion of new deaths accounted for only 2% or less of new confirmed cases, far lower than the peak of 80.9% during the peak period from March to April, which is related to the fact that the second wave of infections are mostly young, and may also indicate that the toxicity of health events is gradually decreasing.However, the impact of health events on the elderly is nonlinearly magnified.. According to the statistics of the CDC CDC in the United States, the hospitalization rate of people aged 65 and 74 is 5 times higher than that of young people aged 18 and 29, and the mortality rate is as high as 90 times. If they are 75 and 84 years old, the hospitalization rate and mortality rate will soar to 8 times and 220 times. In fact, at present, eight out of every 10 people who die as a result of health accidents in the United States are over the age of 65.

So in the next two weeks, the severity of Trump's illness and the speed of his recovery will be key.If the illness is serious and briefly incapacitated (referring to the fact that British Prime Minister Johnson was once in ICU care), a brief transfer of presidential power to Vice President Pence may be required under the 25th Amendment, and then withdrawn after recovery (there have been only three times since the 25th Amendment came into force in 1967, one for Reagan and two for George W. Bush for colonoscopy).But more critical, however, if the illness is serious and it is too late to recover near the election day, it may affect voters' confidence in their physical condition and whether they can successfully assume the functions of president, and thus affect the election situation. after all, this time is too close.

In more extreme cases, how the general election candidates decide will bring greater uncertainty to the general election and policy prospects if it is too serious to continue to run.

►In the coming days, it is worth watching closely whether Democratic presidential candidate Joe Biden will be diagnosed.Given that the first round of presidential debate ended just two days ago, Biden's test results will be particularly critical after Trump's diagnosis. If it is diagnosed as well, it could cast more doubt on the outlook for the election. However, according to media reports, Vice President Pence's test results were negative.

►Deduction of the potential impact on policies, markets and assets.While it is too early to draw any conclusions, the result could have the following potential implications for policies and markets:

1) it may slow down the resumption process that is currently under way.After the second round of health incidents in the United States gradually alleviated in early August, some states gradually started the process of returning to work again; however, the president's diagnosis will have a negative impact on the overall resumption of work and mental emotion. not to mention Trump has been an active supporter of resuming work, which does not rule out a drag on short-term economic repairs and data.

2) the further increase in uncertainty in the general election may make the market continue the current volatile pattern, and investors may also hold a wait-and-see attitude, or even turn to defense and risk aversion periodically.Markets tend to weaken during the October sprint in a normal election year, not to mention the potential so-called "October October Surprise", such as the 2016 FBI survey of Hillary Clinton emails, and the 2016 US stock market remained weak from September until the election vote in early November ("Review the market performance during the 2016 election sprint"). The emergence of the current situation has increased the uncertainty and uncertainty of the outlook, and of course it is entirely possible that it will not have much impact in retrospect, but short-term certainty may suppress sentiment.

3) whether it is possible to break the fiscal policy.「Catalyst」。The second round of fiscal stimulus in the United States is still deadlocked. The Democratic-led House of Representatives has just passed a new $2.2 trillion stimulus package, but it is expected that there may still be resistance in the Republican-controlled Senate. After October 3, both houses of Congress will not be working at the same time for about a month. It is worth watching whether the risk and pressure caused by the president's diagnosis of infection will to some extent become a catalyst to break the current impasse and deal with the current predicament. If it can pass, it will provide some support to the market.

4) pay attention to the risk of renewed geopolitical tension in extreme cases.In extreme cases, if the election situation is therefore tight, it is also necessary to pay attention to the pressure that leads to renewed tension in some policy and geopolitical risks.