George Lucas, managing director Instreet Investment, says Asian markets will be the first to react to the US Presidential election result, although they may close before a result is known depending on how tight the election is.
So how will the market respond to the election?
He notes:
· If Trump wins, the market is expecting a 5% to 10% sell off as a knee jerk reaction, but with a Brexit style recovery afterwards.
· A Clinton win could see the US market easily recover the 3% it has already lost, but this also depends on who wins the Senate and House.
“If you’re a Trump hater, beware – this election is too close to call and the relatively high proportion of undecided voters, along with the historically-high disapproval ratings for both candidates, means it could go either way. Clinton appears to hold a slim lead but it’s within a margin of error,” says Lucas.
On the possibility of US Federal Reserve (Fed) rate hike Lucas noted that “even if Trump wins the election this week, there will be little excuse for the US Federal Reserve (Fed) not to hike interest rates in December following strong recent data.”
“The last couple of weeks have been miserable for Australian and global equities as participants feared a Trump win in the final countdown to the US Presidential election.
“The S&P500 has shed about 3% over the past nine trading days; the ASX200 has shed 4.6% over the last 2 weeks; whilst the pan-European Stoxx 600 index fell to its lowest point since early July. In Japan, the Nikkei 225 dropped 3.1 per cent last week – its worst drop in four months. Not helping the situation was a sell-off in oil and weak US employment data.
“As this was happening, US money market funds (a proxy for cash) absorbed more than $36 billion in the week to 2 November as investors looked for safer assets. Investors also scrambled for “core” government bonds, gold and the Yen,” he said.
