Wall Street boys play the waiting game, await November 8 results
As the US presidential election moves into the home stretch, financial markets are not fully invested in polls that show a win for Hillary Clinton.
Even though polls show the Democratic candidate with a strong lead over Republican Donald Trump, analysts say investors are waiting until after November 8 to lay their money on the table.
“I don’t think it’s fully 100 per cent Clinton is in,” said J. J. Kinahan, chief market strategist at TD Ameritrade, who sees a pullback in risk-oriented investments as a sign of investor caution.
“Usually people are looking to take on extra risk for reward,” he said. “I think this is one case where people are paring back on their risk.”
Wall Street is thought to generally favor Ms Clinton over Mr Trump for president, and equity markets have hovered at historically high levels since July, with the S&P 500 less than three per cent below its all-time peak.
Ms Clinton is considered the more market-friendly outcome, expected to maintain the policies of outgoing President Barack Obama, while the market views Mr Trump as a great unknown, both because of his penchant for controversy and his lack of a record in public office.
Mr Trump has attacked trade partners China and Mexico and accused Federal Reserve Chair Janet Yellen of being a political tool of the Democratic party. Investors are also unsettled by Mr Trump’s seeming embrace of Russian President Vladimir Putin, a sign he may take foreign policy in radical new directions.
Signs of nervousness have been seen in certain trades, analysts say, like the Mexican peso. Mr Trump’s pledge of immigration controls and trade restrictions with Mexico have raised worries over its economy.
The peso sank against the dollar as Mr Trump’s campaign added momentum, but then rebounded on Ms Clinton’s gains following the first presidential debate on September 26.
But it remains down about 9 per cent since Mr Trump secured his party’s nomination in May.
On the other hand, another gauge of market sentiment has been the biotechnology sector, which is seen as vulnerable in a Clinton presidency given the Democrat’s vow to address runaway drug prices.
The Nasdaq biotechnology index has fallen about nine percent over the last month.
Some analysts say the markets have already assumed a Clinton victory.
“To me, the markets clearly want a Clinton win and they have priced that in,” said Nathan Thooft, senior managing director at Manulife Asset Management.
“That’s what they predict, and that’s what they want. If that doesn’t happen, I feel there’s a great level of uncertainty and possible downside to the markets.”