At the time of writing (11 pm NY time), it's looking close highly likely that not only will Donald Trump win the presidency, but the GOP will sweep Congress as well. A few quick thoughts:
* Yet again we have evidence that when close political outcomes are priced at close to a certainty by financial markets, there is the opportunity to make substantial money going the other way. USD/MXN was just over 18.40 at 8.40 pm NY time.
* Political polling and forecasting appears to be a worse than useless enterprise amongst the mainstream; it is actively misleading. It seems clear that much of this is down to the "protest" nature of voting in a post-crisis, pro-austerity world that has seen income gaps widen.
* A GOP clean sweep would be significant, as it would make it substantially easier for Trump to enact a legislative and judicial program. From a market perspective, once the dust has settled some loosening of fiscal policy is inevitable...might this have implications for the yield curve and, eventually, Fed policy?
* Near term, of course, we know what to expect market-wise, both from polls and looking at the screens. The Brexit sterling precedent may be a useful one: a huge move the day of the shock, another large move the following day, and then sideways for a week before a final downward thrust.
* Yet again we have evidence that when close political outcomes are priced at close to a certainty by financial markets, there is the opportunity to make substantial money going the other way. USD/MXN was just over 18.40 at 8.40 pm NY time.
* Political polling and forecasting appears to be a worse than useless enterprise amongst the mainstream; it is actively misleading. It seems clear that much of this is down to the "protest" nature of voting in a post-crisis, pro-austerity world that has seen income gaps widen.
* A GOP clean sweep would be significant, as it would make it substantially easier for Trump to enact a legislative and judicial program. From a market perspective, once the dust has settled some loosening of fiscal policy is inevitable...might this have implications for the yield curve and, eventually, Fed policy?
* Near term, of course, we know what to expect market-wise, both from polls and looking at the screens. The Brexit sterling precedent may be a useful one: a huge move the day of the shock, another large move the following day, and then sideways for a week before a final downward thrust.
46 comments
Click here for commentsPosted first lot of longs at 90% probability of Trump victory.
ReplyPricing in a probable Trump victory, Dow futures are currently down almost 4% at 17,500 and S&P futures have dropped to 4.5% to 2,035.
ReplyOil and the dollar have also stumbled, the Mexican peso has sunk, and gold is surging.
Limit down in S&P
Replyi am making a second Brexit - what a year
Reply100 handles in less than 24 hours
allegations that polls are syatematically biased to put ot mildly have to be seriously considered at this point.
ReplyThis is a fantastic outcome for the financial industry, even if they are too short-sighted to see it. The tremor will pass, the sun will rise each and every day, and four years of complete GOP federal control will place a pause button on the regulatory burden that, along with the victory of passive management, is grinding the Street into dirt.
Replyi took a screen capture of the trades to show my children - we're flying to the US today on such a historical day
ReplyBrexit and Trump - 2016 is the year for the people against the establishment. Governments of the world, take note! and start focusing on real social politics, not business.
MAGA, not Gaga! LOL ....
ReplyWhat's going to happen to Janet? Will she still be around to hike in December?
Reply“84% of the American people, after inflation, had not had a raise of 1 cent since the financial crash.” --Bill Clinton
ReplyTrading has resumed on eMini S&P 500 Futures, and they've bounced back only slightly from the 5% decline that forced the halt. They're now down 4.8% to 2033. What a night!
ReplyBiggest ever daily Dow Jones fall on record is 777 in 2008. Futures showing 833 this evening.
ReplyTom Brokaw just spoke about the depth of voter discontent: “It’s been totally underestimated by those of us in the establishment".
ReplyGlenn Beck, who’s been vocal in his criticism of Trump, was seen shaking his head in disbelief at the results. “We have not listened to the heartland,” he said.
2016 - the year of the Western Spring.
Replyif ever there was a display of people power this was it, has there ever been a candidate that was so hated by the institutions ?
Replydoes this qualify as a black swan ?
Wow, what a year!
ReplyHDC going to jail?
hrc sent her flunky podesta to say they wont concede. wont front up herself to speak to her supporters.
Replyno trump fan but hrc is beyond the pale
she won't go to jail she will used her sudden 'bad health' to escape incarceration
ReplyMM - good call on Trump.
ReplyTwice in one year electorates have shocked the establishment,
Post Brexit, equity markets delivered their own shock to consensus thinking. Could we see that here again?
"Hey President Triumph.....Your Fired!"
ReplyWell, looks like non-event, probably we will be back up in day or two...
Replyi wish this board good luck for the rest of the year
Replyi've gotten out at 2031 for the whole size early this morning (tradelog available for the sake of honest), crazy but true. Flying to Hawaii now for the winter and the wife ordered a holiday and even changed the IB passwords :)
safe trading and in Trump we trust.
Markets have an uncanny ability to under react to game changing news. This is game changing. I wonder how long before we begin to realize the eu is in serious trouble if italy and france vote in the same fashion.
ReplyAnti trade, isnt bullish for us stocks.
Watch the 10 year. Potential for big blowout of risk parity guys in next few days.
Oh and the fed, good luck under trump.
Markets have an uncanny ability to under react to game changing news. This is game changing. I wonder how long before we begin to realize the eu is in serious trouble if italy and france vote in the same fashion.
ReplyAnti trade, isnt bullish for us stocks.
Watch the 10 year. Potential for big blowout of risk parity guys in next few days.
Oh and the fed, good luck under trump.
ReplyUnbelievable relief rally since 3am....the FED policy uncertainty (Yellen fired) could be worth 10% on it's own. Watching/listening on Wednesday to see if he softens stance on overhauling the Fed...
http://crackerjackfinance.com/2016/11/trump-the-arrogance-of-the-elites/
Crackerjack.. Not at all unbelievable. The same confirmation biases were at work in the small hours re price action as there were in the run up calling Clinton. I am having a ball contrarian trading this year,
ReplyFrom p***y grabbing to treasury haircut...
ReplyThis elegant essay written by the much maligned Keynes contains the thoughts for a reasonable blue collar charter with many interesting insights. Worth a peruse....
Replyhttps://www.mtholyoke.edu/acad/intrel/interwar/keynes.htm
Extract:
"But I am not persuaded that the economic advantages of the international division of labor to-day are at all comparable with what they were. I must not be understood to carry my argument beyond a certain point. A considerable degree of international specialization is necessary in a rational world in all cases where it is dictated by wide differences of climate, natural resources, native aptitudes, level of culture and density of population. But over an increasingly wide range of industrial products, and perhaps of agricultural products also, I have become doubtful whether the economic loss of national self-sufficiency is great enough to outweigh the other advantages of gradually bringing the product and the consumer within the ambit of the same national, economic, and financial organization. Experience accumulates to prove that most modem processes of mass production can be performed in most countries and climates with almost equal efficiency. Moreover, with greater wealth, both primary and manufactured products play a smaller relative part in the national economy compared with houses, personal services, and local amenities, which are not equally available for international exchange; with the result that a moderate increase in the real cost of primary and manufactured products consequent on greater national self-sufficiency may cease to be of serious consequence when weighed in the balance against advantages of a different kind. National self-sufficiency, in short, though it costs something, may be becoming a luxury which we can afford, if we happen to want it."
https://youtu.be/S8H2FIf1oH4
ReplyGet back in there...
Funny the panic reaction from EU elites, they're running around like headless chickens now.
ReplyA bee
ReplyIndeed, what price Italy after this.
Actually, it turns out that Hillary was just about the only candidate that could lose the election for the democrats. I just saw an exit poll done yesterday that asked if Bernie Sanders was the candidate who would you have voted for? Turns out he would have won by 8-12 points. It wasn't about issues, it was about whether voters who were undecided would vote for a candidate they considered corrupt. And of course the current vice-president is probably kicking himself in the behind too......
ReplyAs someone who was wrong about a Clinton victory (but right about pubs holding both houses), let me say what caused this.
ReplyThe black vote. Blacks did not show. Look at senate races. Those states with big black populations and close votes were sweep by pubs. Those states with big Mexican American population the dems did better than expected. Those without a big black or big Mexican American population did about like polls said.
Pennsylvania and Wisconsin were key states. When was last time they went pub?
I think markets come back from early drop quickly.
Looks like marijuana might be legal in the US very soon. Those neo liberals in California can at least, now legally and without making up a bs story about a back ache, spark one up to ease their pain...
ReplyLooks like Trudeau's plan for legalization in Canada isnt so crazy now either.
Nico, good on ya.
Amazing scenes..... some of us are old enough to remember the shock of the Reagan win in 1980.
ReplyAgree with B in T, btw, HRC was almost unelectable and the only candidate capable of losing to The Donald. Bernie Sanders would probably have won, since he has some appeal to the same disenfranchised groups as Trump, and would have brought more young people and African Americans to the polls. This is the end of the line for the older right-wing Democrats.
With the dollar now stable after the initial drop, the Long Bond looks a lot more attractive than it did last week or last month. Plenty of falling knives out there, but right now we don't feel like catching any. MXN and EWW are things that look interesting, but we agree with MM here, we suspect this isn't the bottom yet.
Everyone, mea culpa, here I was wrong. Generally, following polls works. Here it did not.
Reply@Bruce in TN, that analysis strikes me as facile. Had Sanders been the candidate, he would simply have faced different attacks, and voters would have told exit pollsters that yeah, they would have voted for Clinton, but not this commie socialist. It turns out that just about half the electorate wanted to Make America Great Again, and voted to.
@Flowthrough, I suspect this will end up being wrong, though I also suspect black turnout not to have matched its Obama peaks. We'll want to look at some actual data, but my guess is that the difference will have been white non-hispanic breaking DJT more decisively than expected.
As of now, both candidates have fewer votes than Mitt Romney did 4 years ago. This speaks to the degree to which both candidates alienated the electorate. You can at least say that a reasonable cadre of Trump's support loved him, whereas I think it is difficult to make the same assertion about HRC.
Reply@MM, this I think also facile, or at least reflecting a little groupthink. Survey data I've seen reflect a roughly proportionate number of enthusiastic supporters for both candidates. Lemme see what the internet says.. here's Gallup from March; everything else I have seen looks similar: http://www.gallup.com/poll/190343/trump-clinton-supporters-lead-enthusiasm.aspx
Reply@ wcw I am not sure why we should believe that (old) poll, when all the others have been wrong. FWIW, Romney had more enthusiastic supporters than Obama in 2012, according to similar a methodology. At the end of the day, the only thing that accurately measures enthusiasm is turnout. Would be interesting to see an analysis of turnout in relative GOP/Dem strongholds yesterday vs 2012.
ReplySo is the long bond now acting in anticipation of the Fed being reorganized as more hawkish in the future?
ReplyWe live in interesting times... agree biggest unknown with Trump market wise is whether he will spark a trade war with China ?
Reply@MM, yeah, what we need are the turnout and demographic data to start a diagnosis.
Reply@Anon1531, imo bonds are being sold in the expectation that unified government will increase deficit spend, which most likely is a safe bet. Likewise drug stocks are bid on expectation it will repeal ACA, a safe bet but imo a poorer one; ACA repeal doesn't help drug stocks.
@Anon1540, speaking of war, the nuclear deal with Iran would seem to be dead now. However, some sort of entente with Russia likely is on the table. Interesting, indeed.
Another reason why trading intraday in US markets with a bias is impossible. Wow I was very wrong, did not expect this rally. Some crazy moves in Health care stocks at the open..
ReplyTen year at ~ 2% already. At some point equities maybe wake up to this point, but for now algo's in control
Bonds are the Falling Knife du jour, apart from MXN, and attracting the attention of our Mean Reversion Department. Let's see how the 10y auction proceeds, not without pain we suspect, but anything north of 2% will draw interest (!) from overseas.
ReplyLong Bonds (for a trade) and munis (for the yield) are already looking a little bit tasty here for those of us who are Yield Hogs, and we are interested to see whether the sharp spike in yields translates into weakness later this week in other yield-rich vehicles like REITs and preferreds. It's bond carnage out there right now, with even TIPS selling off. Of course we have all been warned about this, MM showed the chart of the Long Bond every day for a week or two.
So my FI guys tell me that the long bond being "off by 5 handles" is something to be concerned about... do you think this might impact spooz reaching ATH's before the cash close today? (Asking for a friend). Peace.
ReplyIf I have this right, before last night, market reaches limit down and was halted August 2015. You may recall, VIX hit 54 and VVIX > 200...
Reply