In a historic turn of events, former President Donald Trump's guilty verdict on falsifying documents could have significant implications for market volatility, according to experts. While some investors may view this as a cause for concern, others see it as a potential buying opportunity.

Ed Yardeni of Yardeni Research believes that any sell-off in the market triggered by geopolitical or domestic political crises could present a chance for investors to enter the market. Yardeni emphasized that the market's primary focus will remain on the economy, but political developments that impact the economy will inevitably affect the stock market.

Although Friday's market reaction appeared subdued, experts caution that this calmness may be short-lived. Kim Wallace, senior managing director at 22V Research, predicts that as the election approaches, the VIX (Volatility Index), often referred to as the fear gauge index, will likely experience heightened activity by mid-summer. The market's reaction to various election outcomes will provide crucial clues for investors.

Goldman Sachs strategists Dominic Wilson and Vickie Chang observe that previous election cycles have seen market-moving events during the summer convention season. This indicates that investors should pay attention to potential market shifts as the election draws closer.

So far this year, the VIX has remained relatively low. The CBOE Volatility Index closed below 12, its lowest point since 2019, and well below its historical average of 19.9. With five months remaining until election day, investors are already evaluating which candidate might be more favorable for stocks.

Market analysis conducted by LPL Financial's chief technical strategist, Adam Turnquist, suggests that the market is currently favoring the probability of a Trump victory. The correlation between the S&P 500 and Trump's chances of winning the election has noticeably increased in recent months. Conversely, President Biden's election odds have shown a negative correlation with the market since February.

While past performance indicates that the market tends to fare better under Democratic presidents, major policy areas are expected to impact future market conditions. A victory for President Biden could lead to increased investments in clean energy, manufacturing, expanded healthcare coverage, and lower prescription drug costs.

On the other hand, continued Trump policies could entail an extension of the 2017 tax cuts and trade policies such as imposing tariffs on imports, which could potentially worry markets and raise concerns about inflation.

Isaac Boltansky, policy research director at BTIG, highlights the positive impact of Trump's deregulation agenda on the markets. However, there is apprehension about the potential impact of his trade policies. Sarah Bianchi, who served as deputy U.S. trade representative under Biden, warns that the market has yet to fully price in the risk of a "Trump 2.0 trade war." She suggests that if Trump maintains his lead in the polls, the return of trade-related market volatility should be expected.

As the markets brace for potential turbulence, investors and analysts are closely monitoring political developments and assessing their impact on fiscal policy, taxation, regulations, and geopolitics. The upcoming election will undoubtedly shape market conditions and investment strategies in the coming months.

Disclaimer: This article is for informational purposes only and should not be considered as financial advice. The stock market is subject to volatility, and investors should conduct thorough research and consult with a financial advisor before making any investment decisions.

Author: Seana Smith