What the debate means for the markets, according to Wall Street political analysts

Published Wed, Sep 30 20208:52 AM EDTUpdated Wed, Sep 30 202011:00 AM EDT

(This story is only for CNBC Pro subscribers ) The raucous first presidential debate left many on Wall Street unnerved about President Donald Trump's unwillingness to accept a loss in November and the prospect of a protracted court battle to settle a close election. Tuesday night's debate, the first of three scheduled between Trump and former Vice President Joe Biden , was riddled with interruptions and attacks . I "disagree with notion that debate was a dumpster fire: by definition, dumpster fires are contained," Cowen analyst Chris Krueger wrote in a client note titled "Crazy Train." "Further debates aren't set in stone. Debate was too chaotic to do anything but reinforce both sides. People are exhausted; that was exhausting," the analyst continued. "Trump did not lay out any vision or policy plan for a 2nd Term — other than declaring Biden a Trojan Horse for socialism." Though the topics discussed were historic — a U.S. recession, a pandemic that has killed more than 200,000 people in America, and a bitter fight over Republican efforts to appoint a new Supreme Court justice — both men often took turns swapping personal barbs. But insofar as markets are concerned, perhaps the most disturbing takeaway was Trump's growing confidence in using the Supreme-Court to arbitrate a close 2020 result, wrote Greg Valliere of AGF Investments. "The chilling comments by Trump on a 'rigged' election reinforced our belief that he will go all the way to the Supreme Court if it looks like he narrowly lost," said Valliere, his firm's chief U.S. policy strategist. "Trump will claim that mail-in ballots in key states are fraudulent, and there are fresh examples of irregularities in New York that will reinforce his argument." Though strategists say Biden's plans to increase taxes on the wealthiest Americans could yield market headwinds, Valliere added that a long fight at the Supreme Court to determine the election winner would only make investors more nervous. "The markets have to brace for weeks of uncertainty; the high court didn't settle Bush v. Gore until Dec. 12, 2000," he wrote. "Could a protracted stalemate lead to civil unrest? Trump didn't make any effort last night to calm his far-right supporters," Valliere wrote. The flurry of comments from Wall Street came as U.S. equity futures pointed to losses when regular trading resume, but by late morning, the three major indexes were up more than 1% after optimistic comments by Treasury Secretary Steven Mnuchin regarding stimulus talks. The market sees better odds of Biden winning the election after Tuesday night's debate, according to online betting market PredictIt.org . Bets now show Biden with a 61% chance of winning versus Trump's 42%. That spread has widened since before the debate, when Biden's odds were at 58% and Trump's were at 46%. Here are more comments from select Wall Street analysts: UBS "President Trump appeared unwilling to categorically accept the results of the election if he loses. He railed against pervasive fraud in the use of mailed ballots and appeared to suggest that the Supreme Court will be obliged to arbitrate the results of the election. His suggestion that he would actively contest the results for weeks after the ballots are counted increases the level of uncertainty for market participants and will likely lead to higher volatility as we approach Election Day." Ed Mills, analyst at Raymond James "There has been a narrative among Trump supporters that the debates would be a significant shift towards Trump and a way for the President to make up his deficit in the polls. The betting markets have lagged the public polling as they were looking for the debate to shake up the race and move it towards Trump. I don't see how the debate last night accomplishes a clear shift in this race, so we refocus again on what the data is showing on most probable outcomes. The top investor concern I hear is a protracted post-election battle. The discussion on election integrity last night shows that Trump is laying the groundwork for a post-election battle, if it is close or if he loses. That is uncertainty that the market would like to avoid." Thomas Block, policy strategist at FundStrat Global Advisors "As someone who has worked in and around politics for many years I found the debate a sad night with shouting and insults that I can't remember at any level of government. Markets look for clarity and the debate was a big zero on that count." Chris Krueger, analyst at Cowen "Disagree with notion that debate was a dumpster fire: by definition, dumpster fires are contained." "Trump did not lay out any vision or policy plan for a 2nd Term — other than declaring Biden a Trojan Horse for socialism." "Biden cleared the low hurdle that Trump set with 'Sleepy Joe.' Was it Romney vs. Obama in the first 2012 debate? No. But he didn't fall off the stage like Bob Dole in the 1996 race either. So that — in 2020 — is a win." "Further debates aren't set in stone. Debate was too chaotic to do anything but reinforce both sides. People are exhausted; that was exhausting." Greg Valliere, strategist at AGF Investments "The chilling comments by Trump on a "rigged" election reinforced our belief that he will go all the way to the Supreme Court if it looks like he narrowly lost. Trump will claim that mail-in ballots in key states are fraudulent, and there are fresh examples of irregularities in New York that will reinforce his argument. The markets have to brace for weeks of uncertainty; the high court didn't settle Bush v. Gore until Dec. 12, 2000. Could a protracted stalemate lead to civil unrest? Trump didn't make any effort last night to calm his far-right supporters." Beacon Research "In perhaps the most chaotic presidential debate ever, President Trump dialed it up to 11 on his diatribes, insults, and interruptions. While this Trumpian style worked in 2016, the strategy is not working this year and this debate was a lost opportunity to define former Vice President Joe Biden, instead keeping the focus and controversy on himself." Dennis DeBusschere, strategist at Evercore ISI "The PredictIt odds moved in favor of Biden following the debate (Trumps odds of winning down to 43%) and the odds of Democrats taking the Senate increased to 53%, the first those odds have moved above 50% since late August. Two countervailing forces will impact markets and internals near term. First, passage of fiscal package four ahead of the election remains unlikely. Second, if Democrats sweep, investors should expect a $2.5-3 trillion package. That makes a sharp risk-on factor rotation dependent on a Democratic sweep (still a coin flip). Factor volatility will remain high as sweep odds shift. Until the tax offsets to a stimulus plan are known, a sharp market rally is unlikely." — CNBC's Michael Bloom and Jeff Cox contributed to this report.

People watch the first presidential debate between U.S. President Donald J. Trump and Former U.S. Vice President Joe Biden, on September 29, 2020, in Hoboken, New Jersey, United States.

Tayfun Coskun | Anadolu Agency | Getty Images

(This story is only for CNBC Pro subscribers)

The raucous first presidential debate left many on Wall Street unnerved about President Donald Trump's unwillingness to accept a loss in November and the prospect of a protracted court battle to settle a close election.

Tuesday night's debate, the first of three scheduled between Trump and former Vice President Joe Biden, was riddled with interruptions and attacks.

I "disagree with notion that debate was a dumpster fire: by definition, dumpster fires are contained," Cowen analyst Chris Krueger wrote in a client note titled "Crazy Train."

"Further debates aren't set in stone. Debate was too chaotic to do anything but reinforce both sides. People are exhausted; that was exhausting," the analyst continued. "Trump did not lay out any vision or policy plan for a 2nd Term — other than declaring Biden a Trojan Horse for socialism."