Market volatility is, well, volatile heading up to the US elections

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Wall Street stocks are racing to record highs again and the VIX ‘fear gauge’ and its November and December futures contracts are near six-week lows

Just about the only market consensus all year on November’s US election was that it would be volatile around the vote — but even that’s turning upside down three weeks before polling.

Investment banks and asset managers, who have for decades argued markets would balk at tax and spend policies and prefer congressional gridlock to curb any excesses, are now positively embracing the likelihood of a clean sweep for a Democratic Party expected to spend big and also raise wealth and corporate taxes.

Online market PredictIt puts the chance of a Biden White House as high as 66% and a Democrat clean sweep at 59%.A “blue wave election outcome has curiously flipped from consensus bear to bull catalyst in recent months,” Bank of America's investment flow strategists said on Friday. “In simplest terms, a Democratic sweep reboots a US/global expansion that began around May, has been losing momentum since August and is at risk of a serious stumble,” he added. “Whatever one thinks about the course of regulatory policy, the margin impact of higher corporate taxes and the possibility of stealth deglobalisation, what will matter more for the next 12 months will be front-loaded stimulus.

Some commentators point to the expected passing of Trump's erratic decision-making style and ‘policy via Tweet’ as another reason for lower volatility ahead.

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