Breakingviews - Markets lose virus immunity with Trump diagnosis

U.S. President Donald Trump and first lady Melania Trump walk from the Marine One helicopter back to the White House after traveling to Fort McHenry in Baltimore for Memorial Day holiday commemorations from Washington, U.S., May 25, 2020.

SAN FRANCISCO (Reuters Breakingviews) - Donald Trump’s Covid-19 diagnosis ends the virus immunity that markets have largely enjoyed. The U.S. president said early Friday he tested positive for the disease caused by coronavirus. The ramifications for November’s election, and America’s leadership, depend on the severity of his case. The Federal Reserve has helped prop up markets so far. Investors are now on their own.

After flouting his own government’s health guidelines during the pandemic, arguably exacerbating its severity, Trump’s health update rattled markets. It followed White House aide Hope Hicks’ positive test. Trump said he would be quarantined - but it’s unclear for how long. U.S. stock indexes fell while the U.S. dollar index rose.

Markets also slid after pandemic-induced lockdowns took hold in March but have mostly recovered. That’s largely thanks to the Fed, which pumped liquidity into the financial system and kicked asset purchases into gear, adding about $3 trillion to its balance sheet, which now stands at over $7 trillion.

Fed Chairman Jay Powell also recently signaled the central bank would keep interest rates near zero through 2023. The Nasdaq 100 Index rose 30% this year on the strength of companies like, which saw sales surge as shoppers stayed home. The S&P 500 is up by 4%.

Now investors are in the unusual position of betting on the health of the president. Earlier this year, British Prime Minister Boris Johnson, nearly 20 years Trump’s junior, recovered after battling Covid-19. If Trump has a mild case, it may have a short-term impact. But since he is 74 and overweight, the president is potentially more susceptible. If Trump is unable to perform his duties, he could temporarily hand over power to Vice President Mike Pence.

There’s also a concern about other people he met this week. He saw Treasury Secretary Steven Mnuchin, who usually wears a mask, on Wednesday. Afterward Mnuchin met with House Speaker Nancy Pelosi to discuss an aid package. Trump also debated Democratic presidential contender Joe Biden on Tuesday night. They followed social distancing rules, but neither wore a mask.

There’s about a month left until the Nov. 3 presidential elections. It was already expected to be an unusually unpredictable outcome. That’s already made investors nervous. Trump’s infection brings that anxiety to a new level.


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