Why Trump catching COVID-19 could actually be a good thing for ASX shares

News that the US President caught COVID-19 roiled global markets, but the shakeup is likely to be good thing for ASX stock investors.

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News that the US President caught COVID-19 roiled global markets, but the shakeup is likely to be good thing for ASX stock investors.

That might sound somewhat contradictory when Donald Trump’s infection sent the S&P/ASX 200 Index (Index:^AXJO) tumbling 1.4% on Friday. The S&P 500 Index subsequently lost 1% of its value too.

The sell-off is understandable. Markets hate uncertainty and with Trump being taken to hospital, questions about how the world’s most powerful economy will operate and the impact on the upcoming election are up in the air.

Buy stocks when US president’s health is at risk

But history shows us that any market weakness from US presidents’ health issues are fleeting and relatively shallow.

Even when Ronald Raegan was shot in an attempted assassination on 30 March 1981, the S&P 500 only caught a hiccup.

Moreover, Trump’s coronavirus misadventure may actually be a positive for share markets.

How Trump catching COVID can help stocks

For one, the medical emergency may put more pressure on the Democrats and Republicans to strike a new stimulus deal.

Markets have been anxiously waiting for a fresh round of government support but both parties have so far failed to reach a compromise.

This might now change as the severity of the situation is brought to the forefront, reported Bloomberg.

The other side-effect from Trump’s COVID run in is that it might be enough to give presidential contender Joe Biden a clear lead.

Why a clean Biden win will trigger a market rally

Some think Republican presidents are better for equity markets than a Democrat leader, but that’s a myth.

What will hurt investors is a close election where the outcome isn’t known for days, if not weeks. The stakes are increased this time as Trump said he won’t leave the Oval Office willingly. The only way to get him out with little fuss is if the ballots are undeniably in Biden’s favour.

However, the next few weeks are likely to be a volatile period for investors due to disinformation – and this isn’t because of Trump’s tenuous relationship with the truth.

Expect more market volatility and disinformation

US Presidents have a tradition of hiding their medical condition from the public, lawmakers and even their own administration.

A few examples include Grover Cleveland, Franklin D. Roosevelt and Dwight D. Eisenhower, according to the Washington Post.

The White House says that Trump only has minor symptoms, like a mild fever, and that his admission to hospital is only a “precaution”.

How safe is Trump?

But I doubt Trump would allow himself to be taken to hospital for only a mild fever. That doesn’t gel with the strongman image he likes to portray.

Also, you don’t use an experimental (read unproven) drug on a sitting president unless you really needed to.

I suspect Trump may be in worse shape than what his administration is saying. But don’t expect any clarity on this till well after the November election.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

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