But a lot has happened lately. There are signs that voters were turned off by Trump’s performance in the first presidential debate, in which he sought to bulldoze his opponent by talking over him. Then came the outbreak of Covid-19 cases at the White House. The Biden campaign, meanwhile, got through yesterday’s vice presidential debate without self-inflicted wounds.

“There’s been some repricing post the first and vice-president debate,” Alberto Gallo, head of macro strategies at asset management company Algebris Investments, said of the decline in volatility derivatives. Trump’s “not-so-great performance” has also had an impact, Gallo added.

An average of election polls compiled by FiveThirtyEight signal Biden’s lead has increased to 9.8 percentage points, up from 7.1 percentage points on Sept. 29. A poll by the New York Times and Siena College suggested that voters in Florida and Pennsylvania, two important swing states for the November election, disapproved of Trump’s bullying tone in the debate. A Biden victory by a larger margin could reduce the likelihood of a contested election, because there would be less to argue about in court.

The Nov. 3 vote is likely to be close in some key states, potentially leading to disputes, while mail-in ballot counts could delay the results. And traders are probably haunted by the memory of the 2016 presidential election, in which many investors were caught off guard by Trump’s victory.

But this time around, some analysts think traders have overcorrected when it comes to the risk of a contested vote. “Although we think that these probabilities now look too high, a contested election outcome is still a real risk and one that could have significant—albeit perhaps temporary—asset market impacts,” analysts at Goldman Sachs wrote in a note published Oct. 6. “Market pressure from an election delay should, in most circumstances, ultimately be a temporary phenomenon.”

This story has been corrected in the fifth paragraph to show that Algebris Investments is an asset manager, not a hedge fund. 

📬 Sign up for the Daily Brief

Our free, fast, and fun briefing on the global economy, delivered every weekday morning.