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US Election - Moments of Panic

Markets are full of anxiety and panic at the moment as we enter the final countdown to the US Presidential election. The last two weeks have been miserable for Australian and global equities as participants fear a Trump win.

The S&P500 has shed about 4% over the past ten trading days; the ASX200 has shed 5% over the same period; whilst the pan-European Stoxx 600 index fell to its lowest point since early July. In Japan, the Nikkei 225 dropped over 3% 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.

Election day

All Wednesday afternoon/evening we will be watching the US election results live. Asian markets will be the first to react, 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? 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.

It would seem regardless, the volatility in our markets is set to continue …

In preparing in this article we have not taken into account any particular persons objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision.

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