When we talk about the upcoming elections in US we talk for an event that will influence everyone’s life (more or less) for the next four years. No matter if someone lives or works outside or inside in US its life influenced by US politics.
So if we adopt the above thought we can understand that we talk more about global elections and not only a US domestic vote.
USA like the most countries in the West have two major candidates. One comes from the central right part of the political system (e.g. Conservative, Republican) and the other one from the central left (labour, democrat). The last decades both candidates of the two major parties have not big differences on the way they govern and think.
They have similar personality, profile and use similar language. After the fall of Lehman Brothers and the economic recession more and more new parties and politicians appeared in West and adopted a “new unconventional” political language.
They provided skepticism and mainly criticism for things that for the old political system and politicians were not debatable. Views about how capitalism must change rapidly to a more “fair” system, nationalism, criticism about globalization, anti-immigration rhetoric. Almost all European countries have met more or less the last eight years this kind of new political language so was just a matter of time for US to meet too. The new “unconventional” politicians in the most countries did not form governments but they had representations in the parliament and after years achieved to change politics. The recent Brexit vote was a result that UK Independent party and personally Nigel Farage was pressure the old political system to deal with it.
The time seems that for US arrives as well. Donald Trump a very eccentric personality and completely different from what we have seen for the USA standards appeared and joins huge popularity.
We see high probabilities D. Trump to be elected as the next President of the United States.
We see much higher probabilities than the media and the polls present us. Market seems to agree with them as the volatility remains at historic low levels despite that for markets Trump represents the absolute risk.
If Trump is elected we are going to have turmoil and uncertainty in markets. Some say that Trump’s victory can be compared with two to four Brexits. Unquestionably some large sell off will take place in US and global equity market as already Trump has said that there is a huge speculative bubble in US stock market which is not supported by fundamental factors also he confirmed that he wants a tighter monetary policy with higher rates as he thinks that the current policy is unfair for savers.
Moreover said that monetary policy and particularly Fed president Yellen is political driven from the current government. Easily we understand that a Trump’s victory will also mean a resignation for Yellen. We think that the sharpest reaction will come in Yen which will skyrocket and the stock market which will plunge. USD will not probably meltdown as many expect. A possible victory of Clinton will relief markets and will drive to a risk appetite mood.
For a trader who has decided to take action by trading the financial markets during US election announcement we would suggest that it requires extra caution. Is pointless and extremely risky to try guess the final result. Is better to wait until there are some evidences which reveal who is going be the next president. We also suggest the leverage to drop from 1/400 to 1/150 and even less if we have to do with novice traders.
Never forget that the biggest the surprise from the US election the biggest will be the volatility and the opportunity to make money.