4Q20 Financial Markets Preview

Election volatility may drive investors toward low-risk opportunities in 4Q

Election volatility likely to pause IPO run, push investors toward low-risk or undervalued options

With volatile markets increasingly likely post-election, investors who’ve already made their profits this year may seek low-risk or harder-hit buying opportunities.

The increasing likelihood of a contested U.S. presidential election means the markets could be in for a high dose of volatility in 4Q20, pushing the pause button on a record year for IPOs and sending buysiders looking for companies that are either low risk heading into year-end or have seen their valuations dip.

One maxim of the public markets is that investors hate uncertainty, yet as they head into the fourth quarter, buyside investors find themselves in the position of needing to plan for a scenario in which most of November and December could be embroiled in the highest degree of political uncertainty in generations.

The good news is that many investors have already made their year in terms of performance. From the bottom of the market in March through mid-July, the biotech indexes rose more than 50%, outpacing the general markets, which added about 35% over the same period. 

The following two months saw mixed performance as investors took profits to lock in their gains ahead