The stock market likes predictability. That is why Clinton’s emails matter to the stock market. We are just a week away for the presidential election. Hillary Clinton has been leading in the polls and especially in so-called battleground states. A month ago we speculated if stocks would continue to rise as Trump went down in flames from self-inflicted political wounds. Trump was not broadening his appeal for the middle of the political spectrum which is where U.S. presidential elections are won. And the stock market was starting to believe that Clinton who is more of a known entity that Trump was going to win. Thus stocks were up a bit as the market likes predictability. Now, enter another round of Hillary Clinton email server uncertainty right on the eve of the election.
Apparently a few weeks ago FBI investigators involved in another case found emails relating to Hillary Clinton on a computer that had been shared by one of Clinton’s aides and her estranged husband, Anthony Weiner. The shocker for the Clinton campaign and the markets was that the head of the FBI choose to reveal to congress that there “might be” more emails related to their previously closed investigation of Clinton’s use of a private email server when Secretary of State. Although the FBI head stated that he did not know if there is anything relevant to the Clinton investigation on the computer in question he choose to divulge an ongoing FBI investigation into a matter relating to a U.S. presidential candidate on the eve of the election for which he is taking substantial flack. How about the market? Market Watch says this game changer could derail a traditionally great stretch for stocks.
Thanks to the FBI’s fresh probe into Hillary’s emails, it looks like all that volatility traders have been missing is back. And then some.
The VIX VIX, +3.58% popped to a monthly high on Friday, and there’s nothing to suggest we won’t see more of the same as we careen toward Election Day. Even before the FBI stuff, the “smart money” had already started betting that this market choppiness, which has been absent most of the year, will be here a while.
“This is really a game changer,” says Naeem Aslam, chief market analyst at Think Markets. “The market wasn’t ready for this surprise.”
As it relates to a potential uptick in Trump’s chances at the president, the futures market tells us it still may not be quite ready. After all, a recent report suggests the stock market under a Clinton presidency would be worth 11% more than it would under Trump.
Market consensus is that stocks would benefit substantially from a Clinton election and would not if Trump made it in. To the extent that this “October surprise” could result in a Trump victory or at least Republican retention of the House and Senate this is why Clinton’s emails matter to the stock market. The prospect of a year-end stock rally is substantially diminished by the prospect of Hillary Clinton’s use of a private email server upsetting the election or even dragging into her presidency to the detriment of all other issues germane to governing the nation.