Clinton Not Guilty: Financial Markets vs Betting Markets Discrepancy
The Market and Political View from Adam Jepsen, Founder, Financial Spreads.
The weekend announcement by the FBI stating that Hillary Clinton is not guilty of anything new has produced some very quick moves in the markets.
The main question for Clinton is whether she can quickly wipe the email story from voters' memories?
- - - Markets Discrepancy - - -
Not surprisingly, both the financial markets and betting markets think the story is good news for the Clinton campaign. However a discrepancy has appeared between the two markets.
The betting markets reacted immediately to the news and Trump is back to 5/1 to be President, i.e. the price he was on Thursday 27 October and before the email saga reappeared.
The odds suggest that The Donald now has a 15-20% chance of becoming President. Last week he was given a 30% chance.
US stocks have also reacted positively and have gapped higher on the news.
Both our Dow Jones
and S&P 500 markets are 1.4% higher than the close on Friday 4 November.
However, unlike the betting markets, they remain below the levels of Thursday 27 October.
Likewise, EUR/USD is up 0.8% on Friday's close but still 1.4% lower than the close on Thursday 27 October.
- - - Clinton Email Legacy Issues Remain - - -
While a few of the latest polls have been Clinton-positive the rebound in odds doesn't quite seem justified.
On Thursday 27 October, Clinton was in control of the narrative and the Trump campaign was floundering.
The latest twist is not 100% positive for the Democrats:
- - - US Election: Financial Market vs Betting Market Discrepancy - - -
- It may just remind voters of "Crooked Hillary"
- It may keep potential Clinton voters away
- The story will occupy the front pages when Team Clinton might prefer an anti-Trump story
- Trump can use this late intervention to push both his "rigged system" conspiracy theory and anti-establishment credentials
It's possible we'll see traders throw caution to the wind and have a market rally all the way to the election.
For once though, the financial markets might be taking a more sensible and cautious approach.
With such a tight election it makes sense that the markets don't get too carried away with the news.
Even if Trump only has a 15-20% chance of winning then the cautious approach does seem sensible.
A Republican win could easily trigger a sharp 3-5% fall in US stocks
and similar falls with the US dollar
Price changes to 9.30am, UK time, 7 November 2016.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Adam Jepsen, 3 November 2016