U.S. Election Guide to Markets: What to Watch as Results Come In
- Bonds rally, equities fall if Trump wins or Democrats sweep
- Fiscal stimulus likely, bullish for stocks, bearish for debt
Preparing for Market Black Swans in U.S. Election
With the most unconventional election in modern American history drawing to a close, the global financial markets are betting on more of the same -- a Democrat in the White House kept in check by Republicans in Congress. Given all of the October surprises, including last week’s, investors may be ill-prepared for another on Nov. 8.
The biggest shock would be a victory by Republican Donald Trump or a sweep by Hillary Clinton and the Democrats. Either could send investors running for cover into the safest government bonds, U.S. dollars and the yen and fleeing from riskier equities and emerging markets, much like the aftermath of the U.K.’s June vote to leave the European Union. Beyond that, both candidates want to increase spending and cut taxes which would be bullish for stocks and bearish for fixed income.