US equities turned sharply weaker after the US President Trump indicated that negotiations on further fiscal stimulus measures had been put on ice until after the US election.

It could not have come at the worst time from the market’s perspective: that announcement came just a few hours after Fed Chair Powell warned of “tragic” risks for the economy if further fiscal stimulus is not forthcoming. Powell noted the “expansion is still far from complete” and that too little support would lead to unnecessary hardship.

President Trump put a halt to the stimulus talks, effectively pin pricking the stimulus balloon. And with no fiscal honey balloon to float the market, the laws of gravity took over. Global stock markets fell back to earth as traders turn their focus on the latest warning from Federal Reserve Chair Jerome Powell that without more funding, the economy is in deep trouble.

Hard to argue that point with the steady stream of bad news in the last week about job losses as more and more companies put the finishing touches on restructuring plans that involve significant retrenchments.

And in the absence of fiscal float, it might now cause some concern that a Democrat clean sweep could also bring higher taxes and sterner regulation, offsetting some of the enthusiasm from higher budgetary spending.

Risky business in risky times

However, now it gets a little tricky – yes, the stimulus is coming. Still, if the market is right about a Democratic sweep, it will take a while to deliver and probably February after the inauguration.

Indeed, there will be economical and oil demand repercussions between now and then. Those that need the stimulus cannot contribute to activity simply because they know something is coming months from now as most, if not all in need, are pretty much tapped out.

And not to mention, it becomes a bit of an election pony race as to how much stimulus is in the pipeline, which brings us back the most unvirtuous circle of the too close to call narrative.

Despite the media polls skewing Democrats, independent straw polls are not so nearly convincing. Now fiscal prudence will be a rallying cry for the Republican budgetary hawks and could provide a new arc for upcoming debates revolving around the Democratic dilly-dallying and spendthrift ways.

When a market is prepared for chaos, expect a lack of market chaos. Extreme volatility is a product of surprises, not desired outcomes.

Oil prices drop

Oil markets further declined after The American Petroleum Institute (API) reported a build in crude oil inventories of 951,000 barrels for the week ending October 2 and bearish against a consensus.

Not exactly what the recovery doctor ordered as the oil market was already tanking from a two-week high after President Trump quashed hope for a pre-election stimulus deal, exhausting all of the optimism for a timely boost in demand while providing a market reality check that a run-up to an election is full of surprises.

I guess the broader question is, with less than 30 days left, does it matter? I think it matters a lot as consumers would have received an immediate fiscal put through at the pumps.

I think it matters immensely, even more so to the oil market in desperate need of an immediate fiscal put through to shore up the disheartening demand outlook due to Covid-19.

Still, crude prices are generally holding on to a good chunk of rebound prompted by President Trump’s discharge from Walter Reed, supported by some exogenous factors with Hurricane Delta shuttering 29 % of the Gulf of Mexico’s oil output. And a driller strike in Norway that is limiting some supply.

However, these temporary supports are but papering over the real tragedy unfolding in the oil patch, specifically a lengthy beat-down and tenuous recovery from this nasty epidemic where hotspots around the globe are still prevalent.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi