The first presidential debate from Hofstra University last week hopefully went a long way in helping undecided voters determine which candidate they will support when November rolls around. However, for stock traders, we at Lightspeed think the debate may have provided some helpful clues about how the market will react to the election.
Scientific post-debate polls indicate that Democratic nominee Hillary Clinton was the big winner over Republican nominee Donald Trump on debate night. A CNN/ORC scientific poll of debate viewers revealed that 62% of respondents concluded that Hillary Clinton won the debate, while only 27% of respondents believe Donald Trump won the debate.
Trump and his supporters point to non-scientific online polls, such as those conducted by Fox News, Drudge Report and Time, that indicate Trump won the debate. However, scientifically reliable polls by CNN/ORC, Breitbart/Gravis and YouGov all indicate that a carefully-controlled sampling of the electorate believes that Clinton was the clear winner.
Many traders are looking ahead to Election Day and trying to figure out how the stock market will react to the results. Monday night’s debate was the first time the two candidates squared off face-to-face and gave the market a chance to react to a winner between the two leading candidates.
On Tuesday, the S&P 500 climbed 13.8 points, a 0.64% gain. This positive market reaction could be the first indicator that a Clinton victory in November or Clinton pushing ahead in the polls in the weeks leading up to the election could be signals for U.S. stock traders.
Of course, one data point does not make a trend, and traders should watch to see which candidate wins the next two presidential debates and how the market reacts to those victories as well.
Many American voters are fed up with the status quo in Washington. The President and Congress butt heads seemingly on every issue, and very little meaningful legislation gets passed. For Americans hungry for change, that’s a recipe for frustration. For businesses looking for economic predictability, it’s a best-case scenario.
According to Greg Valliere, chief political strategist at Horizon Investments, the only thing better for the stock market than a Clinton victory could be a Clinton victory coupled with a Republican Congress. “I think the most likely scenario and the one the markets could live with the most is one under which [Clinton] wins but wins modestly because a modest win for her means that at least one of the houses (maybe both) stays Republican,” Valliere said at a luncheon earlier this month.
Politics aside, the stock market has performed exceptionally well in the past eight years with a Democratic president and a Republican Congress. Whether you’ll vote for her or not, it would likely be a smooth transition policy-wise from Obama to Clinton. You can’t blame investors and business leaders for wanting the status quo when the status quo has been so lucrative.
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Disclosure: the author holds no position in the stocks mentioned.
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