On Monday, news outlets were reporting the upward move in the Standard & Poor 500 index a part of the Hillary Clinton effect after the debates. What they were implying is that the capital market would be better off with a Clinton win than a Trump win. On the report, even the Mexican peso was higher. However, realistically speaking, the markets will not change as a result of the proposals and personalities of the two presidential candidates.
This has been the second longest bullish market. As the eighth year of its expansion draws near, the possibility that whoever will be POTUS next will preside over an economic recession is very real. The next term of presidency is likely to be marked with a bearish market and high amounts of debts and deficits. Regardless of who the electorate makes the next president, the central banks will be dominating markets in 2017, just like they have since 2008.
The reality is the person assuming the most powerful office in the country will have an impact on the economics, especially because each candidate has their strong points and areas of weakness. Both candidates have their own goals regarding tax and other regulations. However, they will have a hard time getting anything through the congress, especially the democrats if the republicans will maintain both houses. But the general manner in which the market will react will not be deeply affected by who assumes power.
The stimulus provided by the central banks has been the reason behind asset inflation. Many people argue that earnings have something to do with it, but the reality is that revenue growth has been weak due to low quality earnings recovery.
Currently, the country is experiencing the third huge asset price bubble in a period of 20 years. This is the largest of the bursts and is affecting sovereign and corporate bonds, which has placed assets priced off the low rates in the bubble. The main driver of asset prices over the next few years will not be the president but the mannerisms of the bankers and the global interest rates’ influence.
The country’s economic growth rate has slowed down to a mere 1.5 percent; this is what the next president will be dealing with. In case there is a slight reduction in stock prices, the economy could easily go into a recession. The consumer is the only determinant of whether there will be expansion or contraction. The only thing the president can do is mitigate the results if anything goes wrong.
When the market is bearish, the common stocks fall in price by a margin of 15 to 20 percent. Inventors like Jim Hunt, a financial advisor and the CEO of VTA Publications, stress the importance of industry tricks, like selling stocks and investing in more stable areas such as government bonds and commodities like platinum.
Indicators are in place that a Clinton government would not be kind to the financial and pharma industries. On the other hand, the results of Trump’s ideas to expand the defense and renegotiate trade deals might affect the stocks in a serious way.
In conclusion, the biggest change one can expect of a Clinton or Trump win is that either will probably be a one term president. For the investors, the best thing to do is sell stock and buy gold, silver or platinum while the market is still bullish because a huge bubble is coming.