Presidential Debate Scares the Stock Market

A lead article in Reuters says that global stocks fall before U.S. presidential debate. Why is it that the presidential debate scares the stock market?

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Stock prices around the world declined on Monday ahead of the first U.S. presidential debate between Hillary Clinton and Donald Trump, while oil prices rose in advance of an informal OPEC meeting in Algeria on hopes for an output cut.

Half of America’s likely voters will rely on the presidential debates to help them make their choice between the two major U.S. party nominees in the Nov. 8 election, according to a Reuters/Ipsos poll released on Monday.

“The polls have both candidates neck-to-neck. The debates might increase the lead of one over the other and that’s what the market is fearful of,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

Is the market just afraid of the uncertainty or is it afraid of one of the potential outcomes of the election? Last month we gave some thought to either a Clinton or a Trump presidency and the stock market.

If Hillary Clinton Wins

What a Clinton presidency would mean for stocks depends on whether or not democrats regain control of the senate or even the House of Representatives. We looked at what Kiplinger suggested for stocks picks if Hillary Clinton wins.

Although we have an idea about what Clinton would want the odds are that the Republicans will retain control of the House of Representatives even if they lose the senate. Thus there will need to be deal making for the government work function. That having been said here are the Kiplinger picks.

  • Cognizant Tech Solutions
  • Hospital Corporation of America
  • Lockheed Martin
  • Marriott International
  • Sun Power
  • Toll Brothers
  • Wal-Mart Stores

As Kiplinger notes Clinton has a long track record and stated policy positions on a huge number of issues. As such it is a lot easier to decide how the market would be affected when she is president as opposed to if Trump pulls off an upset.

Clinton has a long and clear track record that will help investors decide where the market might go if she gets into the oval office. That cannot be said for her opponent.

If Donald Trump Wins

What a Trump presidency would mean for stocks is uncertain which is perhaps at the root of why the presidential debate scares the stock market. NASDAQ weighed in on what investors might look for in a Trump presidency. They noted that, like with the Brexit vote, a vote for Trump is a vote against the status quo without a clear idea of what comes next. But if you believe the hype of “the Donald’s” speeches then NASDAQ believes that

construction and materials companies would prosper if the famed wall on the border with Mexico is built and more so if Trump were to follow through with investments in infrastructure. Multinationals would be hurt if Trump nixed trade deals and does not follow through with the Trans Pacific Partnership. Global companies like Amazon and Walmart would be hurt. And meanwhile defense and security stocks would do well if Trump’s wish to make gun permits valid throughout the nation and increase defense spending. The agricultural sector would be hurt if all migrant workers without papers were sent back to Mexico and points south. But lower corporate taxes would be a relief to multinationals who might be persuaded to bring their profits back home.

What if Trump becomes president but the Democrats control the senate and hostile Republicans control the House of Representatives? That might be a recipe for a dysfunctional government worse than that which we have seen.

The prospect of a U.S. government even more dysfunctional that it has been for the last years is perhaps what scares the market the most. Baring a landslide by either party that situation is likely to continue to a greater or lesser degree into the next presidency.

Presidential Debate Scares the Stock Market PPT

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