The results of the US presidential elections as well as recent hopes for the widespread roll-out of a vaccine against Covid-19 has reignited investors’ appetite for taking on risk in their investments, with a particular spike observed in derivative transaction flows.
“We have seen a renewed interest from investors in US indices underlyings, with the S&P, Nasdaq and Dow Jones leading the way in the past few days,” explained Christophe Grosset, Sales Executive at Spectrum Markets. “Against all expectations, neither the anxious wait for a confirmed result in last week’s elections, nor the return of volatile markets in recent weeks have led to the “flight to quality” movement in favour of safe haven assets that we witnessed earlier in the year, at the outset of the pandemic.”
Trading behaviour observed by Spectrum Markets has also been reflective of this trend, with trading volumes in exchange products backed by US indices underlyings increasing by 8 percentage points during election week. This is a significant increase on the current average volumes for these products.
Investment flows in the US stock markets could be positioned to enjoy these favourable tailwinds until the end of the year. Political developments, and the more realistic prospect of a vaccine, are widely acknowledged as catalysts for further rises in market activity.
Grosset added: “We expect investors will be looking to take opposing positions on other types of assets as a result of this week’s strong stock market performance. We could see an increase in trading for currency underlyings, in particular the US dollar, and for gold. Clarity will come with continued positive rhetoric from the US, which will be a welcome change for investors.”
About Spectrum Markets
Spectrum Markets is the trading name of Spectrum MTF Operator GmbH. Headquartered in Frankfurt am Main, Germany, it is a pan-European trading venue for securitised derivatives aimed at financial institutions and their retail investors. Regulated by BaFin and MiFID II compliant, the exchange uses a uniquely open architecture system to allow investors to trade with increased choice, control and stability. Through its pan-European ISIN, 24/5 trading services and its own proprietary venue, Spectrum enables a guaranteed baseline level of liquidity over a range of products and is able to swiftly and safely match a significant number of orders and process multiple quotes every second. Further information can be found at spectrum-markets.com
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