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Illustration: Eniola Odetunde/Axios

Wall Street is digging in for a potentially rocky period as Election Day gets closer.

Why it matters: Investors are facing a "three-headed monster," Brian Belski, chief investment strategist at BMO Capital Markets, tells Axios — a worsening pandemic, an economic stimulus package in limbo, and an imminent election.

  • Investors have digested spiking odds of a Joe Biden win and the likelihood of a blue wave The possibility of a contested election remains a wild card.

Where it stands: The S&P is on pace for the worst week since June, despite yesterday’s partial rebound.

  • For the Dow, it’s set to be the worst week since March.

What's new: Skyrocketing coronavirus cases in the U.S. and Europe are "competing for investors' attention at the same time as we lead up to the election," says Michael Reynolds, investment strategy officer at Glenmede.

  • The threat of further lockdowns (which are already happening across Europe) alongside a worsening outbreak could dent corporate earnings and the fragile economic recovery.

What they're saying: "The market priced in absolute perfection. Any type of sneeze, any type of cough and everyone gets scared," Gene Goldman, chief investment officer at Cetera Investment Management, tells Axios.

Between the lines: The VIX index, which measures market volatility, touched the highest level since June, though it's nowhere near the elevated levels seen earlier this year.

  • Volatility "tends to spike ahead of elections and relative calm returns shortly after the election is decided," Nasdaq's chief economist Phil Mackintosh said yesterday — except in the case of 2000 (the last contested election) and in 2008 (during the financial crisis).
  • But VIX futures indicate investors are betting that election volatility lasts for an extended stretch, Mackintosh notes.

Yes, but: With the exception of 1988, the S&P 500 has seen a positive return from the Tuesday before the election to Election Day ahead of the last 12 presidential runoffs, according to data from Goldman Sachs.

  • The S&P 500 is on track to buck that trend this election year (but there’s still time for the index to fully recover losses).

Go deeper

Sports bettors may be a driving force behind the stock market surge

Illustration: Aïda Amer/Axios

Professional investors have largely abandoned the stock market amid the coronavirus pandemic, but sports bettors and bored millennials have jumped into the retail stock trading market with both feet.

Why it matters: They may be a driving force pushing U.S. stocks to their recent highs — and potentially driving them further.

Dave Lawler, author of World
2 hours ago - World

Americans increasingly see China as an enemy

One in three Americans, and a majority of Republicans, now view China as an enemy of the United States, according to a new survey from Pew Research Center.

By the numbers: Just 9% of Americans consider China a "partner," while 55% see Beijing as a "competitor" and 34% as an "enemy."

Scoop: Leaked HHS docs spotlight Biden's child migrant dilemma

A group of undocumented immigrants walk toward a Customs and Border Patrol station after being apprehended. Photo: Sergio Flores/The Washington Post via Getty Images

Fresh internal documents from the Department of Health and Human Services show how quickly the number of child migrants crossing the border is overwhelming the administration's stretched resources.

Driving the news: In the week ending March 1, the Border Patrol referred to HHS custody an average of 321 children per day, according to documents obtained by Axios. That's up from a weekly average of 203 in late January and early February — and just 47 per day during the first week of January.