The polls are running tight at the brink of elections and people are desperately looking the two possibilities: the prospect that Republican Donald Trump might take over the White House or Democrat Hillary Clinton will make a way to Congress with her party. The market has been in deep trouble as the S&P 500 on Friday logged its first nine-day losing streak in almost 36 years. United States is about a day away from getting it’s new and 45th President, but there has definitely been a lot of drama that has unfolded in this entire process. “Pre-game and post-game, Wall Street will be handicapping outcomes of what has been the most contentious presidential election in recent history, and either way, markets could remain both volatile and vulnerable in the week ahead”, reported CNBC Before the final announcement is made, we analyze the current market situation and give an overall view of how things could turn out to be if either of the nominees were to win the election.
As of the latest updates, there have been news from both sides. Hillary Clinton, the Democratic nominee has been cleared by the FBI of all e-mail drama that was surrounding her since the past month and Donald Trump, the Republican nominee had to be taken away safely during his campaign speech after there was a person allegedly spotted with a gun at his rally. To start with, both these news have made significant changes on the market. Hillary Clinton had a 12-point lead over Donald Trump before the whole email saga and inquiry was re-sparked. Even though she has been cleared of everything right on the verge of elections, she painfully suffered a drop in votes as Donald Trump caught up to her. To the dismay of Clinton’s supporters, the 12-point lead has shrunk down to just one-point in the past week, affecting Hillary’s campaign drastically. After Hillary Clinton’s name was cleared again from the e-mail scandal, the Asian markets traded high, while Hillary Clinton must have heaved a sigh of relief at the very last moment. It was also good news for investors who have an appetite for risk in this environment, especially with the result being on a brink. The Mexican Peso also quickly strengthened after FBI’s clean word on Hillary but a Trump victory can change circumstances drastically for the Mexicans especially after his verdict and speeches on building a wall, sending back immigrants and setting a rather tough immigration policy.
But, the big questions that surface right now are: How are markets going to open on Monday and Tuesday (before the result)? How is the market going to change if Trump makes his way to the White House? How will Hillary work with the Republicans to get things done if she makes the cut? And finally: How will the markets hold up in the short and long term if either of them were to operate for the next 4 years?
Let’s look at a Trump win:
“We don’t know what happens on Monday and Tuesday, but there is a general perception to what people will think: Trump wins, market goes down. Hillary wins, market goes up,” said Peter Boockvar, chief market analyst at The Lindsey Group. And analyst predictions seem to be agreeing with the views as Barclays analysts estimate the S&P 500 could lose as much as 11% to 13% if Trump wins, and it faces headwinds of 4% to 5% if his probability of winning gets to 50 percent. They based their analyses on market moves and the election odds, after the three presidential debates. They also examined moves after the news of an FBI investigation into Clinton emails, and when Trump won key Republican primaries. Keith Parker, Barclays global equity strategist, said the market may sell off on a Trump victory, but similar to the period after the U.K. Brexit vote in June, stocks may bounce back as investors focus on the economy and growth. The Fed is also expected to continue to be accommodative, and perhaps not hike rates, as expected in December if markets are turbulent. So, is a Trump victory suggesting not only a fall in the market, but a stop on the Fed funds rate too?
Citigroup analysts expect a Trump victory would send Treasury yields higher and steepen the curve, though yields have been moving lower in a safety trade. They also expect the dollar to continue moving lower if Clinton wins, but if Trump wins there would be safe-haven flights to the Japanese yen and Swiss franc. Emerging market currencies would be vulnerable, especially the Mexican peso which moves lower when Trump is perceived to be doing well.
Where Clinton’s win will take the market:
Hillary Clinton will not be upset by her strong campaign, support and funding that she has raised for her campaign. Hillary has been able to bag twice as much funding than Donald Trump as mentioned by Google and research done by Open Secrets. As we had already seen, the Asian and overall world markets are going up keeping in mind the fact that Hillary Clinton got out of the e-mail probe AGAIN. This basically shows the extent of the global influence Hillary Clinton has on the markets.
Despite the ongoing political turmoil in America, Thomas Scotto, Professor of Government at the University of Strathclyde said that the financial markets will welcome the election of Clinton. He added, “Markets will calm and breathe a sigh of relief and businesses will know what they are getting. There will be an ordered process of governance.” ANZ chief economist Richard Yetsenga said, “If Mrs. Clinton won, a relief rally would occur in some asset classes, with investors believing she would provide a more stable administration. A Clinton victory would also strengthen the prospect that the Federal Reserve would raise interest rates when the central bank meets in December. The financial markets indicate an 80 per cent chance US rates will be higher by the end of the year.”
Clinton’s victory is also predicted to boost global stocks, why? Well, if it’s not clear from the positive performance of the Asian and Mexican markets already, it’s because she brings with her a wealth of experience and she will have her own distinct policies. The markets like stability and Hillary Clinton can provide stability with her policies at work. As analysts predict, “In the longer term, Clinton may not do much for growth — she has a weakness for the kind of fiddly tax changes that have proved a dismal failure in Europe. But in the immediate wake of her victory, stocks are likely to surge.” Also, the best thing that could happen to the global markets over the next couple of years is to make a smooth transition back to normal levels of interest rates — and that is a lot more likely to happen under Clinton. Coming to the topic of free trade, which has been a major issue to debate on, a Clinton victory, by contrast, would make Brexit look more like a one off — and investors could reassure themselves that free trade is here to stay.
Bracing for impact:
With the new President all set to take his or her seat in about 24 hours, we had a look at the possibilities of what the market could look like in the short-term and long-term if either of the nominees were to take the hot seat. But, to summarize, the entire market process has been a painful market charade for the participants from January 2015 to November 2016. The volatility and uncertainty have made a pretty big mark on the economy and once we have a winner, money will be put to work based on the platform and ideals of that winner. The market has been uncertain for a while following various controversies every now and then for both candidates, the market and all its participants are now eagerly waiting for one clear winner so they actually know what direction they can head their investments into.
Even though the support for Trump is narrow, he has done a good job catching up in the last few weeks over the controversy which held Clinton, but with Clinton getting a clean chit now, is the game already over for Donald Trump & Co.? If Trump wins, there will be various questions that are going to be raised over what really went wrong with Hillary’s campaign or if in turn it was the FBI that led to her downfall? Though a Trump win will also question the American markets and if America will be a superpower anymore assuming that a 11-13% fall is predicted after Trump’s win. If Hillary wins, short-term growth is given just by the news, but how is she going to handle the United States in the long run?
With markets opening in favor of Clinton on Monday mornings all around the world, people are relieved to not see much uncertainty in the market as the final verdict lies just a few hours ahead……