Complacent Investors Ignore Clinton Emails at their Own Risk

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Complacent Investors Ignore Clinton Emails at their Own Risk

Complacent Investors Ignore Clinton Emails at their Own Risk

The Market and Political View from Adam Jepsen, Founder, Financial Spreads.

With Friday's news that the FBI is looking into Hillary Clinton's emails again we saw brisk selling of the US dollar, Dow Jones and S&P 500.

However, those markets are now back to, or very close to, the levels they were trading at on Thursday.

The problem for the markets is that Clinton looks to be priced in. If Trump wins there could be some very sharp selling and investors seem to be ignoring this risk, also see Double Trouble For the Markets if Trump Wins.

- - - Financial Markets vs Bookmaker Disparity - - -

While the dollar and US stocks have recovered from the shock of the new FBI probe, the bookmakers have reacted differently.

Before the news broke, the Republican's campaign was on the back foot and he was priced 5/1, i.e. he had a 15-20% chance of becoming President.

With Clinton now on the defensive, the odds of a Trump win have shortened. He's now between 3/1 and 4/1, i.e. the bookmakers now put the chances of a Trump Presidency at 20-25%.

- - - The Change in Odds Can Be Easily Justified - - -

The financial markets may have already discounted the new risks.

However, the betting markets are telling a slightly different story and highlighting a potential hazard for investors.

While there will be no quick answers from the new probe, the story changes the narrative of the Presidential campaign with little more than a week to go.

The Democrat is now on the back foot and resting on her Achilles heal.

Team Trump is given the moral boost that it badly needed.

In an ugly race between two unpopular candidates, Hillary has been unceremoniously shoved into the limelight.

There are also many Congressmen who are up for election but want to avoid being associated with Donald Trump. This is the perfect focal point for them to attack Clinton without having to support Trump.

While Trump is still the outsider, it's difficult to understand why the markets are so blasé. Investors should plan for this upcoming risk event.

By Adam Jepsen, 31 October 2016

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