US Stock Market Action Signals A Trump Victory
$DIA, $SPY, $QQQ, $VXX
The US stock market has a good track record calling presidential races. Today, it is sending information that counts against Democrat Hillary Clinton.
The performance of the S&P 500 Index has signaled the outcome of every Presidential election since Y 1984.
A gain in the benchmark for American equity in the 3 months prior to the vote has seen the incumbent party win 86% of the time since Y 1928.
Now, the benchmark is down 2.9% since 8 August with just a week until the vote on 8 November, a fact that augurs well for Donald Trump.
The US stock market’s record of prescience is derived from its sensitivity to the economy, with falling shares potentially correlating with consumer discontent that might break in favor of a challenger.
While this year’s signal ranks with the weaker ones historically, it comes as growth in GDP is sluggish and follows the biggest monthly retreat in consumer confidence in a year. Some analysts also think the Fed’s QE stimulus has made stocks a less reliable signal of economic health than they were in the past.
People may be saying ‘I think Clinton is going to win,’ but people are not putting their money to work on the fear of a Brexit like even. The range of outcomes has been increasing in recent weeks rather than decreasing.”
Mrs. Clinton’s once-dominant lead over Republican Donald Trump has faded in polls since news Friday that her e-Mails remain a topic of interest to the FBI.
Those hoping to use equities as a thermometer should be aware that the stock market has rarely been as divorced from the economy as in the last 7 years. Helped along by near-Zero interest rates, the S&P 500 has returned 3.7% a Quarter on average since March 2009, compared with a 0.9% gainer in GDP. That gap is the widest since World War II.
Fed rate intentions are playing a role too.
The odds that the central bank tightens this year surging past 70%. That has helped boost financial shares 1.2% since 8 August.
Banks and tech shares are the only sectors of the 11 in the S&P 500 that have gained. Phone, real-estate and utility shares have plunged in that frame, as rising odds for higher interest rates damped enthusiasm for stocks coveted for their high dividend payouts.
The banking sector is also the industry most closely tied to the election and favors Donald Trump. The S&P 500 Investment Banking and Brokerage index has rallied 14% in the last 3 months.
Despite the fact that Mrs. Clinton has been ahead in the polls and is likely to win, most of the traditional industries that you would expect would do better under a Republican Presidency have done better.
The election is giving people an excuse to stand still. Most do not want to make any big bets in front of something we know will be resolved on Election Day.
The US Presidential race was the focus Tuesday after a new joint poll conducted by ABC News and the Washington Post showed that Republican nominee Donald Trump is leading Democratic nominee Hillary Clinton.
The poll unnerved participants who had previously priced in a Hillary Clinton Presidency. Accordingly, the CBOE Volatility Index (VIX 18.58, +1.52) rose more than 1 point.
Tuesday, the US major stock market indexes finished at: DJIA -105.32 at 18037.10, NAS Comp -35.56 at 5153.58, S&P 500 -14.43 at 2111.76
Volume: Trade was heavy with over 1.7-B/shares exchanged on the NYSE
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Neutral (-0.24)||Bearish (-0.33)||Bearish (-0.42)||Neutral (0.03)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Bearish (-0.29)||Neutral (-0.20)||Very Bearish (-0.52)||Neutral (-0.16)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Neutral (-0.03)||Bearish (-0.25)||Neutral (0.04)||Neutral (0.12)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Neutral (-0.18)||Neutral (-0.09)||Neutral (-0.06)||Bearish (-0.38)|