“His Brain Has Not Only Been Washed… Its Been Dry Cleaned” - The 2016 US Election

I have often been asked if the outcome of the US election “matters” for markets.  Usually, the short answer is “no”.  However, this time the period leading up to this election and its consequences may be an exception.

Central to this thesis is the fact that Markets HATE uncertainty.

In the period leading up to a US election it matters, little if the leading contender is Democrat or Republican, only that their policy bent is known and that investors can take positions consistent with their understanding of those policies. Stability and predictability are good.  If the race is tight, market volatility has historically been high. This can almost entirely be attributed to a lack of certainty (think Bush vs. Gore in 2000). 

Once a President is elected, it matters little to markets what party they represent.  Historically, the US economy (and hence its equity and bond markets) have not performed appreciably better under either Democrat or Republican Presidents.

What is different this time is that one candidate is a Washington veteran and representative of the “establishment” whereas the other is an unpredictable anti-establishment.  One proposes to largely “stay the course”.  The other proposes to radically reform immigration policy, renegotiate bilateral trade agreements, and mutual defense pacts with allies.

The Markets are most likely to react most favorably to a “predictable” President. If that candidate can hold on to their lead in the polls and capture the White House I feel that this outcome would be best for the markets.  The alternative would be to introduce unprecedented (no pun intended) uncertainty for the foreseeable future. The resulting stress could be a disastrous at this stage in the fragile economic recovery.   So, US readers, please… elect the “Certainty President”!

* This publication contains opinions of the writer and may not reflect opinions of Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc.. The information contained herein was obtained from sources believed to be reliable, but no representation, or warranty, express or implied, is made by the writer or Insert either Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc. or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal or account advice. As each situation is different you should consult your own professional Advisors for advice based on your specific circumstances.