With the US presidential election just hours away, the financial markets are preparing for a bumpy ride. Unlike previous elections, where the outcome was more predictable, the 2016 presidential race is shaping up to be a tight battle. That’s why traders are looking for every edge they can get to hedge against uncertainty.
We don’t have to go back too far to get a glimpse of how the presidential race is impacting the financial markets. On September 26, the day of the first presidential debate, a Bloomberg poll showed that Republican candidate Donald Trump had opened up a two-point lead on Democratic frontrunner Hillary Clinton.[1] This caused quite the stir on Wall Street, leading to one of the biggest selloffs in US stocks since US Labour Day. The Dow Jones Industrial Average plunged 167 points that day, while the S&P 500 Index declined nearly 1%.[2] All this because the market’s preferred candidate (Hillary Clinton) appeared to be losing momentum against a wildcard contender with no background in politics.
While Hillary Clinton regained an 11-point lead leading up to the second presidential debate on October 9,[3] the countdown to the election will be a tense time for traders. Rather than tip-toe around the markets, traders may use the easyMarkets dealCancellation feature to protect against election-related volatility.
For a small transparent fee, dealCancellation gives traders the opportunity to cancel their losing positions up to 60 minutes after placing it and have any losses returned. There’s no limit to the number of times dealCancellation may be used. The small fee that enables you to cancel your deal isn’t comparable to the amount of money you might lose if your trade goes wrong, especially during election season.
easyMarkets offers dealCancellation on major currencies, a range of indices, oil and precious metals such as gold and silver.
Even without a Donald Trump-like candidate on the ballot, election years are difficult to navigate for the financial markets. Since 1928, the Standard & Poor’s 500 Index has declined an average of 2.8% in presidential election years that do not include incumbents seeking re-election.[4] With Donald Trump in the mix, the threat of a knee-jerk reaction in the markets is much greater.
To be fair, the market’s preference for Hillary Clinton has less to do with politics and more to do with convenience. Traders are more concerned about what a Trump presidency might entail and how his policies might impact the world of finance. Although he has stated vague positions on free trade, taxation and foreign policy, his presidency brings with it a cloud of uncertainty that the market would rather do without. Therefore, traders should expect more volatility in the event that the tide swing back in his favour over the next four weeks.
With dealCancellation, traders don’t have to be afraid of volatility, nor should they avoid market-moving events on the economic calendar. If you are especially concerned about election-related volatility, you may consider enabling dealCancellation protection before placing your trade. This will give you up to 60 minutes to change your mind in the event that the trade goes against you.
The presidential election isn’t the only thing weighing on investors. A brewing financial crisis in Europe and tough Brexit rhetoric from the British government are also weighing on risk-averse traders. Additionally, the US Federal Reserve appears to be eying its second interest rate increase later this year. All of these factors could trigger volatility in the market. In this environment, it may be prudent to have dealCancellation by your side.
Call us on 1300 303 908 if you want to know when would be the best time to use dealCancellation.
“dealCancellation© Option is an ORE patent pending under the patent “Easy Cancellation Option” application number 62334455.”
[1] John McCormick (September 26, 2016). “Trump, Clinton Deadlocked in Bloomberg Poll Before Key Debate.” Bloomberg Politics.
[2] Sam Bourgi (September 26, 2016). “DJIA Today: Dow Futures Sell-Off as Investors Weigh the Risks of Trump Presidency.” Economic Calendar.
[3] Scott Bixby and Tom McCarthy (October 11, 2016). “Hillary Clinton opens up 11-point lead in pre-debate poll – campaign live.” The Guardian.
[4] Merrill Lynch. How Presidential Elections Affect the Markets.
