BlackRock: Markets Underestimate Risk of U.S. Presidential Candidates Challenging Election Results

On October 24, Jean Boivin of the BlackRock Investment Institute said the market is underestimating the risk that one of the U.S. presidential candidates will contest the election results next month. A disputed victory could lead to “weeks of very messy legal battles” that could shake up risky assets.

While stocks are still near all-time highs, Treasuries have already been hit by the sell-off. Trying to trade the U.S. election is “foolish behavior” and the real concern is the controversial election scenario, which is not being adequately reflected in the market. If investors want to be prepared for a certain scenario, then the disputed US election result is one of those scenarios. With the race so tight, it's increasingly likely that voters and investors will wait until after election night to find out the results - especially if either candidate chooses to challenge the vote counts in key swing states.