World Markets Spooked As Chance Of Trump Election Win Rises

If you thought the world’s stock market reaction to the UK’s Brexit vote was bad, wait until you see what happens if Donald Trump wins the US election next Tuesday.

Huge shift in polls

Before last Friday, it looked like Hillary Clinton was starting to walk away with it. The Donald was rocked by leaked videos and audio samples which saw him make some horrendous comments about women and his behaviour with them. It did not go down well with the world. But this is Donald Trump, and somehow he managed to ride the whole thing out.

It did look though at that point that the damage had been done and Hillary Clinton was going to become the first female President of the United States.

Until last Friday evening. In a shock turn of events, the FBI announced that it was to launch a new investigation into emails that may have links to Mrs Clinton, in a domestic political drama that happened last year. Immediately the world media went into overdrive, and as expected, the last FBI investigation into Clinton’s use of a private email sever, which was so damaging to her, was brought back up again.

The email scandal has been huge news in the US, and has been a source of great pain for Clinton. She would have assumed that after the FBI had said “case closed” on the last investigation, that this was a dead story. It seems not. And you have to question the timing of this new investigation, so close to polling day.

Since the news of this new investigation broke last Friday evening, there has been quite a dramatic shift in the polls between Trump and Clinton. The gap in the polls have narrowed significantly, especially in the battleground states that Trump needs to win if he is to become President. Crucially, there has now been one or two polls that show Trump leading in the national count. This is a huge change in fortunes in just a few days, and if it stays this close, and when you take into account the poor performance of opinion polls in the last few years, the chance of a Trump presidency is significantly higher now.

The markets do not like this. At all.

Markets spooked

Stock markets, the dollar and even the commodity market, does not like the above. Up to now, markets have priced in a Clinton win. Any market moves on the assumption of a Clinton win have mostly already happened. If the world was to wake up to a Hillary win, there might still be some sell off, but nothing dramatic.

If however we wake up to a Trump win, you can expect a market sell-off that would match, or most likely eclipse what we saw after the Brexit vote. In fact, a Trump win would make Brexit look like a very pedestrian issue.

We are already seeing this possibility play out in the markets already. For eight straight days the FTSE100, S&P 500, DOW and NASDAQ have fallen. Some days have been pretty sharp. As polls from the states have shown some quite major narrowing, with a couple of national polls actually showing Trump in the lead, traders have been hedging and selling off, just in case the unthinkable happens.

And it will continue. There are only a few days left before the election, and one full trading day, next Monday, before Americans go to the polls. Over the weekend there will be a flood of opinion polls, and if they are shown to be close, and a swing one way or another within the margins of error, markets will be seriously shaky come Monday morning. If, and this is a big if, there are opinion polls that show Trump leading by Monday, you can expect titanic sell-offs as the world starts to digest the prospect of Donald Trump leader of the free world for at least four years.

Could there be any benefits?

I think everyone over here has made their mind up about Donald Trump. His rhetoric is very 1920’s. His comments about women are pure vulgarity. He’s seen as the typical misogynistic, old American man. Yet, he knows that populism is becoming the new state of the Western world. He’s managed to tap into the discontent that has swelled in America for decades.

Yet, if we look at this from a purely selfish point of view in the UK, there could be one or two quick little benefits should he win. One of them being the value of Sterling. It is almost guaranteed that it will shoot up if he does win. The Dollar will suddenly look very shaky, and traders will look to go invest in something safer. And despite Brexit, Sterling will be a safer bet than the Dollar at that point. How long it lasts is anyone’s guess.

This is of course all hypothetical. The polls still show a narrow Clinton win. The polls also showed a narrow Remain win for the EU referendum also. But we all know how that turned out.