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From our CIO | Election Eve

by: Rick Wedell
published: November, 07th 2016


By Rick Wedell, CIO

Market Update 11/7/16 – Election Eve

 

Hey Folks,

Markets are up over 2% on the day on the back of the FBI news over the weekend and the early Hispanic voter turnout numbers.  As for the former, essentially the FBI commented that after a review of the 650K emails, many of which were duplicates to what they had already reviewed, they were back in the same place that they were before – no criminal charges.  As to the latter, early Hispanic voter turnout has apparently been huge in key battleground states like North Carolina, Nevada, and Florida.  Assuming that they can help Hillary hold these states, and we are back to the “ideal” scenario for equities prior to the election – high probability of a Hillary win with Republican control of at least one house of congress.

A couple thoughts as we head into Tuesday.

First, go vote.  Our voter turnout in the 2014 mid-term election was approximately 36.4%, according to PBS, which was the lowest it had been in 70 years.  That’s kind of embarrassing.  Even though you may live in a state that is likely to overwhelmingly vote in one direction or another for the national races, the local races are also important. 

Second, according to Bloomberg, initial market returns in the first few days / weeks after the election are largely non-informative for what happens over the duration of a candidate’s term.  No one single person controls the economy.  There are influencers, to be sure, but economic cycles generally continue to work their course regardless of who is in charge.  If Hillary wins but the Republicans hold on to the House, we are likely to see a little bit of a rally.  If the Democrats sweep, or if Trump wins, we will likely see a risk off trade.  All else equal, it will take a couple of days to work through that volatility and then the market focus will turn back to the fundamentals, which actually have been relatively positive of late, subject to the 2200 ceiling on the S&P.  To the extent we continue to see the Hillary rally that we are seeing today, I would expect that pre-election enthusiasm to dampen any post-election rally.

I will have more on Wednesday after we have official results.

All the best,

Rick 

Rick Wedell is neither affiliated with nor endorsed by LPL Financial.

 

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  No strategy assures success or protects against loss. Investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.