How to Trade the U.S. Presidential Election – Trump Against Clinton

U.S. Presidential Election – The Facts

November 8, the United States citizens head to the poll to elect their next president. The battle to succeed Barrack Obama is on with the key contenders being businessman Donald Trump (Rep), Bernie Sanders (Dep), and Hillary Clinton (Dep). Trump has already secured the republican nomination after the withdrawal of Ted Cruz. Hillary Clinton has won more caucuses than Bernie Sanders which makes her the best person to battle it out with Trump. The fact of the matter is that when the United States goes to the polls, the market will definitely react. The best example to illustrate this is what happened in 2000 when the main contenders were Bill Clinton and Al Gore. Before the official reports on the winner were announced, word went around that Al Gore would be the next president. The market slid and fell by more than 3.2%. However, later in the day when the official reports came out with a Bill Clinton win, the markets gained by 4%. This is the power of the United States elections. Interestingly, a researcher with Strategas Research Partners has identified that markets are the best indicators to who will win the general election. According to Davis Clifton, head of research for Strategas, the financial markets have correctly predicted the winner of the general election 19 times (out of 22) in the past. Three months to the election, if the markets are positive, then the incumbent will win the election. In this case, if the markets are positive during this time, Hillary Clinton will win the election.

U.S. Presidential Election – Trump Win

A number of polls released in the last couple of days show a mixed ending for the two main contenders. An ABC News/Washington Post poll recently put Trump ahead of Clinton by 46% against her 43%. On another poll by NBC News/WSJ Poll shows Hillary Clinton leading Trump by 46% to 43%. A head-to-head poll between Donald Trump and Bernie Sanders shows the latter beating Trump by 54% to 39%. One reason why Trump seems to be winning is that he is seen as the anti-establishment. He is self-funded and has placed American’s interest ahead of any other international duties. For instance, he has promised to deport more than 11 million illegal migrants from the US. He has also stated that he will likely have a difficult working relationship with some US allies such as David Cameron. Trump has also promised to revoke the Obamacare health plan and also the NAFTA trade agreement. The economy is not Trump’s strongest point. In fact, in recent interviews, he has stated that he believes that the American economy is in a bubble that would burst. According to him, it’s only a matter of when not if the bubble will burst. He has also stated that he would not want to inherit a bust bubble. Therefore, the immediate market response to a Trump win will be negative to the United States market and the dollar. This is as investors develop new ways of trading the new dispensation. As a trader, you should pay close attention at the polls before the election. This will help you price in a Trump win or loss.

U.S. Presidential Election – Clinton Win

Hillary Clinton will most likely be the presidential candidate for the Democrats. Hillary has been part and parcel of the Obama’s presidential term. In his first term, she served as the secretary of the state. Therefore, her win will mean status quo. Her policy on the economy remains similar to those of Obama. Some of her proposals are: to raise minimum wage, expand overtime, and encouraging companies to share profits with the employees. Some of these issues will have negative impacts to corporate profits which could lead to significant losses. Therefore, a Hillary Clinton win while being a sign of status quo could lead to significant losses in the financial markets. However, the consensus is that her win could lead to a general strong financial market including the dollar.

U.S. Presidential Election – Useful Links

  • Read about the U.S. Presidential Election on CNN
  • Read the latest news on the U.S. Presidential Election on The Guardian