DEVELOPING NOW: In Major Shift, Stock Market Prepares For Trump Victory
Tightening polls just a week before the US presidential election sent tremors through financial markets on Tuesday, as investors rethought their long-held bets on a Hillary Clinton victory.
The Vix index, a measure of expected US stock market volatility known as Wall Street’s “fear gauge”, neared highs last seen in the aftermath of the UK’s vote to leave the EU this summer. Gold, seen as the ultimate haven investment, rose to its highest level since early October, while the Mexican peso — a barometer of election sentiment because of Donald Trump’s pledge to build a wall along America’s southern border — fell as much as 2.1 per cent against the US dollar in volatile trading.
“With the Brexit trading experience in recent memory, it seems that some traders don’t want to be caught off side again and have started to act,” said Colin Cieszynski, chief market strategist at CMC Markets.
Investors see Mrs Clinton as heralding less uncertainty for markets partly because her long political career means her policies are seen as more predictable. Fresh polls in the wake of a new FBI probe into her email use have challenged assumptions about her chances of winning.
A Washington Post-ABC News tracking poll released on Tuesday showed Mr Trump with a one-point lead over Mrs Clinton nationally, marking the first time that the Republican has held a lead in that poll since May. In the RealClearPolitics average of recent polls, Mrs Clinton now leads Mr Trump by just 2.2 points — down from a 7 point lead just two weeks ago.
The Trump campaign has seized on the changing state of the race by battering Mrs Clinton on core issues such as Obamacare, and arguing that voters will face four years of federal probes and Washington gridlock if they send Mrs Clinton to the White House.
“If we don’t repeal and replace Obamacare we will destroy American healthcare forever. It is one of the single most important reasons why we must win on November 8,” Mr Trump said at a joint appearance with vice-presidential nominee Mike Pence in Pennsylvania.
In the final week of the campaign, Mr Trump has announced plans to spend $25m on ads in more than a dozen states, while both candidates are spending a significant amount of time in Florida, a state the Trump campaign has acknowledged it must win if it has any hope of reaching the White House. Mrs Clinton toured the state on Tuesday while Mr Trump is due to arrive on Wednesday.
“Markets are now going to have to recalibrate for a coin toss outcome versus what they thought was a sure thing,” said Nicholas Colas, chief market strategist at Convergex. “That will happen headline by headline and tick by tick until next Tuesday.”
Gold was up more than 1 per cent at daily highs. “That’s not to say people are rushing out to buy Krugerrands over fear of a Trump victory, but more that all risk assets are recalibrating in light of the new poll numbers,” Mr Colas said.