The base case scenario doesn’t freak out Wall Street. But some wonder whether the U.S. election could turn out to be like the shocking Brexit vote. Will the polls get it wrong in the U.S. election too and leave investors scrambling for safety at the last minute?
“This extraordinary political volatility hasn’t sunk in yet on Wall Street,” said Greg Valliere, chief strategist at Horizon Investments, back in April. That’s even more the case now — just over 115 days from the election. “It’s a toxic brew for the markets.”
Sure, a “modest Clinton win” is likely, Valliere says, but he sees the other two scenarios (a strong Clinton win with the Senate flipping Democratic or a Republican sweep with Trump in the White House and the GOP controlling both chambers of Congress) as very scary for the market.
He predicts Clinton would be emboldened by a big win and likely use her presidential powers to heighten scrutiny of Wall Street and other businesses. In contrast, if Trump won, he would probably move quickly to get the U.S. out of NAFTA and potentially enact tariffs on key trading partners.
For now, it’s all eyes on the polls from the “rust belt” states. If Trump starts pulling ahead in places like Ohio and Pennsylvania, Wall Street will likely start making moves to sell stocks and buy bonds, gold and Bitcoin.