Traders Ignore 30% Chance of Trump Being Commander-in-Chief

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Traders Ignore 30% Chance of Trump Being Commander-in-Chief

Traders Ignore 30% Chance of Trump Being Commander-in-Chief

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


The bookmakers have shortened the odds on Trump and now give him a 30% chance of being President.

I.e. there is a slightly higher chance of Trump being President than there is of a typical Premiership football match ending in a draw.

If Trump is made Commander-in-Chief then I wouldn't be surprised to see a quick 3-5% fall in the Dow Jones and S&P 500. The dollar could also see a sharp fall.

The problem is that the markets seem to be sleepwalking into this risk event much like they did with Brexit.

- - - Email Scandal Keeps Clinton on the Back Foot - - -

Before the Hillary Clinton email scandal came back to the fore on Friday, the Trumps were given a 15-20% chance of getting the keys to the White House.

Since then, Hillary has been unable to shift the story to Donald Trump's many short-comings.

Even when the story changes to one that questions the FBI's timing, it just reminds voters of 'Crocked Hillary'.

It is difficult to see how Clinton will regain control of the narrative unless a significant anti-Trump story breaks.

Of course, it is possible that both camps are still holding one large piece of mud that is yet to be thrown.


- - - Minor Stock Market and Forex Adjustment - - -

The markets have reacted to the FBI email investigation but only in a fairly limited manner.

Since the close on Thursday evening, the Dow has dropped about 1.0%, the S&P 500 is down about 1.3% and the NASDAQ 100 is off by about 1.5%.

In the forex markets, the euro and sterling are up 1.6% and 2.1% respectively against the dollar.

The dollar has dropped about 2.0% against both the Japanese yen and Swiss franc.

Gold, which some regard as a safe-haven is up about 1.5%.

However, given that gold is priced in dollars, and the dollar weakness that we've seen, it's difficult to read too much into that move.


- - - Complacent Markets - - -

The above moves do not look like the markets are preparing themselves for a big risk event.

Given that we could see some rather brisk selling, the markets look complacent at best.


(Price changes from 23.59, Thursday 27 October to 11.59, Thursday 3 November 2016, UK time).


By Adam Jepsen, 6 November 2016


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