Good morning traders!
Traders have been speculating on the US election for a little while now, but last week showed increased volumes of trades and recent polls show a narrowing of Hillary Clinton’s lead over Donald Trump. I don’t fully understand the intricacies of the swing states, but it is notable that Trump is ahead in Florida and Ohio, states that have historically voted for the winning candidate.
It is widely regarded that a Clinton victory is seen largely as the status quo and that Clinton would opt for expansionary fiscal policy short-term. In addition, Clinton is likely to tone down her protectionist stance if in office. In contrast, it is believed that a Trump victory would trigger a substantial fiscal expansion, particularly from 2018 onward and could trigger a global trade war. In addition, a Trump victory could also threaten the Fed’s independence, while he takes a very hawkish stance on immigration. Actual policy changes are likely to be more modest due to resistance from Congress at home and pressure from foreign partners.
I like the idea of a fall is US dollar if Trump wins the US election. A Clinton win would trigger a fall in EUR/USD to 1.0950. I think global equity markets would fall 3-5% on a Trump win but it would be a potential buying opportunity.
I would personally love to just leave the market alone for this week and trade after the results, in fact that is what I am going to recommend to everyone. I am sure that nearly none of you will listen to me, but that’s traders for you.
Any analysis this week would be pointless because the volatility and the swings will be crazy.
Just stay out of trouble this week.