This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Despite Trump closing the gap of late, the market’s base case scenario is that we’ll see a Clinton presidency with a Democrat Senate and Republican House, followed somewhat behind by a Clinton presidency and the Republicans gaining both the Senate and the House. The wind is to Trump’s back in the polls, though, and the prospect of a Trump win and a split congress has increased.
Markets have been responding with traders reducing risk, buying volatility structures (the volatility index or ‘VIX’ has gained 73% in the last seven sessions) and increasing exposure to safe haven assets such as gold or JPY to ride out this period of uncertainty. However, I feel the market is specifically keen to understand:
- If Trump does win, will he genuinely follow through with his promise to sack Janet Yellen? How much influence would Trump exert on the Federal Reserve?
- Will the loser even accept the result, or will we be thrown into a period of uncertainty similar to 2000 and the Bush vs Gore election?
Key times to consider on Wednesday
Similar to the UK referendum, the vote counts will be staggered through the day and a candidate must gain 270 votes through the Electoral College to be named president ( understand more). Each state therefore carries a different number of Electoral votes, but it’s the swing states that are most important in determining who will be named president. The states that will really get the market’s focus above others include Florida (polls close 11:00 AEDT), New Hampshire (11:00 AEDT), Ohio (11:30 AEDT), North Carolina (11:30 AEDT), Pennsylvania (12:00 AEDT), Nevada (14:00 AEDT) and Iowa (14:00 AEDT). Results of each state should be known within 1-2 hours after the times disclosed.
Keep an eye on Pennsylvania, North Carolina and Florida. If Clinton polls well here (say taking two out of three states), the market will feel the probability of Clinton polling well in other key battleground states is elevated.
In terms of absolute votes, the states with the largest number of votes are: California (55 Electoral votes), Florida (29 Electoral votes), New York (29 votes), Texas (38 votes). California will be latest to report their votes at 15:00 AEDT.
If the result is not close, we should have a firm understanding by 15:00 AEDT.