On Sunday afternoon, after reviewing Hillary Clinton’s emails, FBI director James Comey informed Congress that she would not face criminal charges.
The timely update ̶ less than 48 hours before election-day voting ̶ followed nine days of considerable speculation.
Stocks around the world jumped on Monday. The S&P 500 (NYSE: SPY) opened sharply higher and closed the day up 2.2%.
That move reversed consecutive days of losses for the major U.S. stock market indices. That was the lengthiest decline in 36 years.
So why had stocks been falling? Primarily because on Friday, Sept. 28, Comey re-opened the Clinton email investigation. The market perceived this news as bad for Hillary Clinton’s campaign for the White House.
The media ̶ and pollsters ̶ consider Clinton the front-runner in the 2016 presidential election. CNN’s Poll of Polls averages results from the five most recently released national polls. It had Clinton leading Trump by 47% to 42%. Yet after this news broke, those poll numbers began to tighten.
Generally speaking, the stock market prefers certainty and stability. A presidency for Clinton is viewed as a continuation of President Barack Obama’s policies. In fact, some have even described a Clinton presidency as “Obama’s third term.”
During the six days that the FBI email investigation remained open, the stock market fell EVERY day. That’s because the market perceived a greater risk that Trump could win the presidency
In a recent survey, 73% of Wyatt Investment Research readers said that “Donald Trump would be better for the economy and stock market.”
Our subscribers are among the smartest and most diligent investors. So I have a lot of respect for your views.
Yet the financial media is largely skeptical of the views expressed in the survey. Why?
Because if Hillary Clinton is the next president, the financial media have a good idea of how the country will be governed. Meanwhile, if Trump is elected, there is greater uncertainty on a range of important issues including domestic policies, foreign affairs and trade.
Right now, our opinions of who is better for the stock market and economy is really meaningless.
And it’s important to put politics aside for a minute. Because investors in the stock market are telling us that they would prefer to have Clinton in the Oval Office.
That’s why stocks dropped 1% on Sept. 28 on news of a continued investigation into Clinton’s emails . . . and continued falling for days afterwards.
It’s also why stocks rose 2.2% yesterday after she was cleared in the latest investigation.
It’s no coincidence that stocks fell as Trump rose in the polls . . . and that this reversed as soon as the FBI said it wouldn’t pursue charges after reviewing Clinton’s latest email messages.
This tells me two important things:
- If Clinton wins tomorrow, stocks will likely rise by another 2% to 3%. That’s because the market thinks she’ll continue Obama’s policies, and therefore perceives her to be less risky.
- If Trump wins tomorrow, stocks will likely fall by 2% to 3%. That’s because Trump is an unknown and is less predictable. The market hates uncertainty, and will drop immediately if he wins.
The short-term move is interesting, but isn’t very important. Over the intermediate and long-term, the policies of the new president will impact the economy and stock market.
Join me this week for an urgent Presidential Election Briefing.
Inside this just-announced event, we’ll discuss:
- Election Results: President, House and Senate contests
- How the balance of power could impact the economy
- Top sectors for big gains and losses in 2017
- Specific stock recommendations
- Actionable income trades
This exclusive 60-minute event is free for Wyatt Research members.
P.S. Please do ONLY two things today:
#1: Vote in today’s important election.
#2: Please click here to access my urgent briefing.