7 November 2016
Just sitting here at the dock of the bay.
Markets are beset by the slumber that one experiences on a languid summers day. What is there to do? But wait for the election result which has the potential to polarise even more an already polarised political scene. And not only are the politicians at odds but so too the voting public. We will elect Congressmen and women whose sole purpose is to thwart anything that Hillary may wish to do and if Trump is elected they may also believe that thwarting Donald is also part of the contract. This really is madness and the US political scene has descended into something resembling a bad dream.
And what can markets do about this. Nothing because markets are now realizing that there is a chance that Donald could win in the same manner that Brexit occurred almost by default. Markets will stay quiet until Wednesday after which there will be a gage as to the scale of whoever wins the US election.
As this drama unfolds there is a strong possibility that the Fed will finally raise rates in December. The Jobs report although soggy yet again, shows sufficient growth, inflation is slowly edging up, the third quarter GDP was slightly better than expected and Company earnings were slightly positive. The economy is now in a position where it may just be possible to raise rates if and only if (IFF for the maths students) this trend of improving economic conditions continues.
On the day, bonds enjoyed a respite from the selling and rallied a few points, and equities continued their weak trend and sold a little. The Vix is finally living up to its name sake, the Fear Index and is finally showing some fear. The Vix was 21.7 and is starting to push out of its typical level and showing the market has some concerns over the election.
Aussie Market Today.
I fully expect markets to be quiet between now and Wednesday when we have a clearer guide on who will be President of the USA. If Trump, trumps Hillary he would have defied all odds and his victory would herald a lot of uncertainty. Equites will jump and bonds will be trashed as Trump stands for significant spending. If Hillary wins expect more blockages in Congress and a USA that is lowly descending into the abyss because nothing can get done. What I find intriguing is that the US citizen is so concerned about being able to have a gun they don’t give a toss about their economy the state of infrastructure and legislated lethargy.
Expect bonds over the next day or so to be better bid in a quiet market and equities to weaken just a little more. Otherwise go to lunch and come back Wednesday when the Fun starts.