Madam Or Mister President - Pricing In A Presidency

Summary

  • The market begins to factor in a non-Clinton Presidency.
  • Late momentum allows Trump to close gap with Clinton, forcing the market to recalibrate.
  • A spurt in risk averseness has led to indiscriminate selling.
  • Healthcare and Biotechs do have a future, not being reflected in current valuations.
  • Prudent to hold on to capital and readjust portfolio after election outcome on Tuesday, November 8.

Politics - Graycell Advisors

Through much of the Summer and early Fall, the market has anticipated a Presidency of Mrs. Clinton. The polls also justified the confidence. Even though investors are wiser post-Brexit about the vulnerabilities of polls, the data was too strong to disregard.

But just a few days before the Day of Verdict, what was once a faint but persistent drumbeat deep in the mines of Moria has now surfaced above ground in a loud crescendo that may just have the momentum to upend the status quo.

Clinton's Chance of Winning Slide from 87% to 64% in a Week

Source: FiveThirtyEight.com

Since last week the polls had begun to show some normal pullback for Clinton (blue line) from a very high level. But last Friday's FBI announcement of reopening the email server investigation, literally knocked the wind out of the campaign's sails and a normal pullback has turned into a disruptive slide.

To the technically minded, Clinton's Blue Line could be framed as a "Double-Top," while Trump's Red Line as a "Cup with a Long Handle or a "Double-Bottom." And investors know, which looks more bullish.

The new polling data is causing tremendous anxiety and a steady recalibration of the market expectations. A Trump win is not considered helpful to higher market valuations due to prolonged policy uncertainty. Consequently, the markets have been sliding down as fast as the polling numbers of Clinton.

Markets Slide As Well Losing 3% to 6% Over A Week

Stock Market - Graycell Advisors

The S&P 500 and Nasdaq have been declining for the last 8 consecutive sessions, matching the S&P 500's longest run of losses - 8 days - over the past 20 years. The last instance was at the height of the financial crisis in October 2008. The current decline beats the 7-day losing streaks, due to the Lehman bankruptcy in 2008 and the European debt crisis in

This article was written by

Tarun Chandra, CFA profile picture
4.65K Followers
A healthcare growth portfolio with a record of consistently strong returns

I have worked as an Analyst on both the Buy (Asset Management) and Sell (Investment Brokerage) sides, as well as in Strategy and Finance roles for technology services companies. For many years, I have been publishing risk-adjusted, return-driven quantitative model portfolios.


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