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Trump scandal magnifies bias that Clinton win good for US markets

Monday, October 10, 2016 - 09:01
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The latest scandal in USRepublican Donald Trump's White House bid bolsters the campaign of his rival, Democrat Hillary Clinton, and magnifies an existing bias that a Clinton win is going to be better for US markets, strategists said on Sunday.

[NEW YORK] The latest scandal in US Republican Donald Trump's White House bid bolsters the campaign of his rival, Democrat Hillary Clinton, and magnifies an existing bias that a Clinton win is going to be better for US markets, strategists said on Sunday.

In a now infamous video released on Friday, Mr Trump, then a reality TV star, is heard talking on an open microphone about groping females and trying to seduce a married woman. The video was taped only months after Mr Trump married his third wife, Melania.

Strategists in a recent Reuters equity poll mostly viewed an election victory on Nov 8 by Mrs Clinton as more positive for stocks until year end, largely because her positions are well known.

An early clue of the scandal's impact might be seen in Sunday's early Mexican peso gains and US stock futures trading.

US stock index futures opened higher, with S&P 500 e-minis up 6 points, or 0.28 per cent.

"It's a positive reaction (in stocks), and it's very consistent with what the market has been discounting, which is that Clinton will win and that's good news," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York. "It's also saying the House of Representatives will stay in the hands of the Republicans," he added.

Investors await the second US presidential debate scheduled for later on Sunday. It will be the first time the candidates face off after the Trump video.

The scandal surrounding Mr Trump's comments has also created a groundswell of prominent Republicans, both in and out of office, to call for him to withdraw from the race.

Strategists say this could uproot the election process in a way that creates nervousness for investors. "If, in fact, Republicans are going to go ahead and replace him, the chaos that would result, I think, would be a big negative for the market because it would lead to uncertainty for the dollar and our place in the world - though I don't think that will happen," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

Earlier Sunday, the Mexico's peso gained more than 1.8 per cent against the dollar in thinly traded market conditions. Trump has been critical of US trade deals with Mexico and other countries and has called for the creation of a border wall.

But Phil Orlando, chief equity market strategist at Federated Investors in New York, said what will happen in markets on Monday will depend largely on how the debate goes what the substance of it is.

Half of America's likely voters will rely on the presidential debates to help them make their choice between the two major US party nominees in the Nov 8 election, according to a Reuters/Ipsos poll released prior to the first debate on Sept 26.

US stocks briefly gained ground following the perceived win by Mrs Clinton in the first debate.

Steven Englander, global head of G10 currency strategy at CitiFX in New York, said: "The market is looking for post-debate confirmation that Clinton is in a comfortable lead before adding significantly to positions.

"Both Trump and Clinton supporters expected that emerging market currencies and US equities would go down and the VIX would go up if Trump were to win and vice versa if Clinton wins," he added.

REUTERS