Yes, it causes a great excitement in the market. It seems such an uncertainty will continue until the election results are announced.
The high level of attention on the U.S election is obviously understandable, but the focus on the market's reaction seems misguided. Step back and look at the environment and each scenario (dem vs rep win) individually. High Level Neither candidate can or will implement policy changes on November 9th, Obama remains POTUS through 2016. So, in the next few weeks, on a macro level the United States economic snapshot remains unchanged. Obviously investors/traders will hypothesize and extrapolate and will buy/sell based on this. This buying/selling will, in turn, impact markets. But without the follow through of policy changes or economic adjustments, their market transactions should translate to noise/volatility (i.e. temporary market movements). Absolutely NO crystal ball here, but maybe this will be similar to the Brexit scenario? Nothing actually changed and temporary market dislocations were neutralized in short order. Clinton Victory A democrat victory would largely be a continuation of current policy and action. In terms of market action, this is a "safe" outcome. I don't think there's even much more to say. Markets would probably react accordingly. Trump Victory A market knee-jerk reaction wouldn't be surprising based on how stocks are currently selling off with negative Clinton news. But again, he can't and won't change anything in 2016, so any major market moves will be based on conjecture. Also, when calmer heads prevail (institutional money "trumping" retail), I think the opinion that cutting corporate tax rates and lessening regulation will largely offset any isolationist rhetoric will dominate. So, maybe a brief but sharp selloff followed by a market rally? Ultimately, the economic situation is characterized by expansion/growth, albeit muted and slowly deteriorating. The yield curve (one of the better visuals of detrended yield curve: http://www.mackresearch.com/global-yield-curves-may-be-signaling-recession/) is known for being early but accuarte, but it appears that it may be deteriorating to a range which spells trouble for the domestic economy sometime in 2018. 2018 is a complete guess, but based on extrapolating the current yield curve trend and adding in the fact that it's an early indicator, it may be a reasonable time frame to plan for. So, resumption of bull market regardless of election outcome. Then equity markets slowly become impacted by what appears to be gradually deteriorating economic fundamentals. disclaimer: I own stocks, individual issues and mutual funds.
Overall I'd tend to agree. However depending on your asset class I do want to point out that it's not exactly the case that nothing changed with Brexit, as you can see from the GBP/USD chart below. While the FTSE bounced back, the Pound hasn't.
Well said; I agree that long term little will change, but I suspect if there was a Trump win that would offer significant short term opportunities - Long Puts in SPY/SPX for the trip down, and Long Calls to be in place when it pops back up. Of course timing is everything, and that's the trick.
Oh, for sure. I am only talking about equities. Thank you for clearing that up, I should have made that clear.
Nothing is for certain, but I do strongly believe that wall street is using the election to buy back shares from the public. What other seismic event apart from war could so easily supply those greedy bastards with the inventory they need to repeat the buy low sell high cycle. ESPECIALLY in a low rate environment lacking volatility. Somehow retail is always stuck long at the top and this is likely no exception. One could simply go 10-50% cash with their portfolio and begin to dollar-cost average back in to the market after a 20% correction. You'll thank me later. BD
Something to be said for that approach, worked great for me in 2008 which I caught about 20% before it bottomed out but by averaging in I ended up in a pretty good spot.