Investors may be forgiven for staying conservative on stocks even after an important employment report comes out and the Federal Reserve board take their monthly meeting.
One of the most hotly contested presidential races in history is entering the closing stretch with the final vote only ten days away. The campaign, which has dominated the media for months, is set to have a say in the markets as Donald Trump and Hillary Clinton push and shove for a place in the White House.
Controversy is continuing to rear its ugly head in political circles as the FBI says it is looking at new evidence in its investigation of Clinton’s email account. Most experts are predicting a Clinton win, so any upset in the expected outcome could sway investor sentiment negatively. Just the email probe news shook the markets briefly as stocks dipped and the CBOE Volatility Index rose to a fortnightly high point.
“The election is looming and everyone is getting a little rattled. Even reports and data that usually settles nerves are not going to have the usual calming effect,” said BB&T Wealth Management VP Bucky Hellwig. “Of course, we knew this was coming. Traditionally a presidential election will cause a drift in sentiment but especially one this close, and where an upset will have huge ramifications.”
The current state of political equality is expected to remain, with analysts forecasting a Clinton win for the Democrats but with the Republicans hanging onto the U.S. House of Representatives.
In the last couple of weeks Clinton’s lead has grown, giving some people concerns that the Democrats could win congress and the presidency, which would radically change the political landscape. Beijing-based investment firm CTI China Renaissance recently ran a poll that revealed foreign investment into the U.S. would drop significantly if one political side held too much power.
“It’s going to negatively impact certain sectors if the Democrats gain too much control,” said Prudential Financials chief analyst Ed Campbell. “I’m sure there are some in the financial world rooting for Trump to close the gap, but certainly not to go all the way to the White House.”
Fund managers and traders are still betting on no action by the Fed this time round, and all expect a hike in December. The next meeting takes place just days before the election process begins, it would be poor timing to introduce any hike in that timeframe.
