October 26, 2020

Why President Trumps positive COVID-19 test is good for the markets, according to Fundstrats Tom Lee

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  • President Trump testing positive for COVID-19 could be good for the stock market, according to Fundstrat’s Tom Lee.
  • The development could be a positive one in the sense that more Americans, specifically skeptics of the virus, should begin to treat the virus seriously and follow protocols to help limit the spread of the disease, Lee said.
  • Increased compliance with mask-wearing and social distancing protocols could help squash the recent uptick in daily COVID-19 cases, which would help the economy reopen both faster and safer.
  • Visit Business Insider’s homepage for more stories.

Stocks around the world nosedived on Friday after it was revealed that President Trump and First Lady Melania Trump tested positive for COVID-19.

The sell-off should present a compelling opportunity for long-term investors to buy the dip in stocks, as Trump’s diagnosis is ultimately “good for the markets,” Fundstrat’s Tom Lee said on Friday.

Investors seem to agree with Lee. After falling as much as 1.7% in Friday morning trades, the S&P 500 cut its losses more than in half, trading down just 0.7% as of this writing.

Friday’s sell-off is a “knee-jerk” reaction, according to Lee, which is understandable given that the most powerful man on the planet has contracted COVID-19 just 35 days before the November election, increasing uncertainty as to what will happen next.

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But there are a number of reasons, according to Lee, that the positive COVID-19 diagnosis for the president is actually good for the stock market.

First, Trump getting sick repudiates skeptics who have shied away from wearing masks and social distancing. This should help increase compliance of mask wearing, Lee opined.

“This would help contain the recent surge in cases and might even push further down the path of cases,” said Lee.

It would be good timing, considering that daily COVID-19 cases have been on the rise in recent weeks, helping spark part of the September correction in stocks.

An improvement in daily COVID-19 cases and treatment options could help the economy reopen quicker.

Read more: Peter Mallouk built a $34 million RIA into a $50 billion giant. The wealth-management CEO pinpoints 3 opportunities his firm is implementing in client portfolios, and shares 2 tips on how to accumulate wealth.

And if Trump recovers quickly from the virus, it would serve as a validation of US therapeutics and prove that the US has a better handle on treatment today than it did six months ago, helping reduce the risk of death.

Aside from the increased compliance of COVID-19 safety precautions, a potential upside driver of the stock market is an additional round of fiscal stimulus from Congress, which is still in negotiation stages between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin. 

Impacting the stimulus negotiations more than Trump’s COVID-19 diagnosis is likely the September jobs report, which showed 661,000 jobs added to the US economy last month, missing estimates by nearly 200,000, and representing a significant slowdown from August’s job gain of 1.4 million.

Read more: Sustainable-stock funds are snapping up shares of these 20 companies – and most of them beat the market during September’s turmoil, RBC says