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Bond and stock markets eye upcoming election

Longer dated yields declined slightly this week as all eyes are focused on the upcoming presidential election and the fading prospects for fiscal stimulus in the near term. Equity markets climbed on Friday following better than expected measures of retail sales and consumer sentiment, bringing the S&P 500 to its third consecutive weekly advance. Bond yields also rose following Friday's data, but not enought to fully claw back the yield declines registered earlier in the week.

With just over two weeks left to the election date, bond and stock markets are reacting differently to the prospect of a Democratic administration with equity volatility gauges remaining subdued while bond volatility gauges have moved higher. The bond market's reaction is likely due to the prospect for a larger fiscal stimulus package that would accompany a Biden election.

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