Uncertainty over the US presidential election is promoting financial turbulence around the world. Stocks are fluctuating wildly as investors hold their breath before the election ends. The S&P 500 halted a 7 day slide while oil continued to free fall. The Mexican peso & British sterling both experienced a rebound due to the current political climate. In the next week both Britain & the United States are going to make historic votes. Only time will tell how the market will react to these new developments.
Elections Wreak Havoc on Financial Markets
It’s no secret that investors are worried about the presidential elections in the U.S. Equities are struggling as worries about next week’s election reached an all time high. Mexico’s peso rose as Trump trailed Hillary in the polls, officially ending a two day slide. Since Trump has been adamantly opposed to Mexicans working in the US, every time Hillary shines the peso recovers. Unfortunately it’s impossible to predict how the elections will end. Earlier Hillary Clinton was in the lead, but now her email scandal is losing her votes. The race is so close that it could go either way. Now that the gap between the two is closing, the suspense is shaking up the market.
“Until a week ago, the market calculated Hillary would win, but now the race seems to be on again,” said Christian Zogg, head of equity and fixed income at LLB Asset Management in Vaduz, Liechtenstein. “Nobody knows really what to expect from Trump, so the market is bound to get nervous. In addition, there is always the Fed hovering over the market.”
Even though the U.S. election is stealing the show, another crucial decision is being made in the UK. The pound surged 1.1% to $1.2443 after Parliament got included on the Brexit vote. The Bank of England contributed to this recovery by announcing that it will no longer cut interest rates this year. This provoked the sterling to climb against all 16 of its major peers. Despite a series of important decisions, the future is looking brighter for the pound.
Stocks around the world did backflips in the face of these major elections. The S&P 500 rose 0.1%, leaving it at 2,100.68. The Stoxx Europe 600 Index mirrored this rise, making its first rebound in 10 days. In total European stocks added 0.3%, making it a banner week. Marathon Oil Corp surged by 13% after the company barely avoided predicted losses. Ironically, Egypt’s stocks led gains in global equities after a landmark bank decision to let their currency float. This surprise measure was implemented to combat the country’s alarming dollar shortage.
Even though many stocks increased, not everyone got lucky. The pound’s rally smacked the FTSE 100 Index down 0.4% as exporters slid. Facebook Inc. shares fell after the company was confronted with sluggish revenue growth. Fitbit Inc. also experienced heavy losses as their holiday quarter earnings fell flat on its face. The dollar fell 0.2%, putting it on its longest slide since July. Oil also slid as U.S. stockpiles increased by 14.4 million barrels.
Even though these elections are enough to give anyone a heart attack, the market is reacting conservatively. Most people aren’t happy with either presidential candidate, so this election has turned into picking the lesser of two evils. Brexit is just as unappealing, but at least it will be regulated by Parliament. Either way, the market will adapt accordingly. These doomsday prophecies aren’t enough to sink a market that’s already witnessed plenty of disaster.