Goldman Sachs: Expect Intense Election Day Vol for S&P 500 and Key ETFs

As the United States approaches its November 5 election day, Goldman Sachs’ derivatives research has flagged the likelihood of substantial volatility across markets, with options activity hinting at a highly turbulent session. This expectation of volatility underscores investor concerns over both immediate election results and the potential policy paths of the two leading candidates.

The S&P 500 is expected to experience a significant swing of approximately 2.1 percent based on options pricing, reflecting investors’ apprehension about the immediate impact of election outcomes on the broader equity market.

While a 2 percent fluctuation may not sound dramatic on the surface, such a move would represent a substantial shift, highlighting both the level of uncertainty surrounding the election and the potential for drastic shifts in economic policy.

Additionally, the options pricing around major macroeconomic ETFs points to an average implied move of 5.3 percent, compared to an average 2.8 percent on election day for the 2016 and 2020 cycles.

This forecast reflects widespread investor concerns over the current political climate and the differing fiscal and trade policies likely under each candidate. The higher expected volatility in ETFs also suggests investors are hedging against not only direct U.S. outcomes but potential ripple effects in global markets, especially in Asian sessions following election night.

Among the sectors most likely to be impacted, options activity suggests particularly high volatility for China-linked funds, with some market participants bracing for fluctuations exceeding 7 percent in certain cases. This increased volatility comes in light of the aggressive posture both Democratic and Republican candidates have maintained toward China.

President Biden has continued a firm stance on trade, while former President Trump has proposed expanding tariffs further. This uncertainty has amplified options activity on funds with exposure to Chinese assets, as any aggressive moves on tariffs or supply chains could significantly affect companies with heavy international reliance.

Bitcoin is another asset under the spotlight, with options pricing for the ProShares Bitcoin ETF indicating a potential move of over 7 percent on election day.

The heightened volatility in cryptocurrency markets could be attributed to investor assumptions about the impact of fiscal and regulatory stances under either administration, especially concerning digital currencies. Cryptocurrencies have generally performed well under increased fiscal stimulus expectations, and each candidate’s policies could produce diverging outcomes for this sector.

As the election approaches, investors are likely to keep a close watch on these volatile asset classes and adjust their strategies to account for potential swings. With current options data suggesting market expectations for one of the most unpredictable election days in recent history, the high implied moves across various sectors underscore the critical role of policy uncertainty in shaping today’s markets.