Analysts have described a possible Donald Trump election victory as the equivalent of Brexit II. Financial markets were in disarray after that geopolitical surprise, though they rebounded. Big banks have predicted, however, that a Trump presidency might have even bigger implications than Brexit.
Indeed, early results, which admittedly might be heavy on states considered Republican strongholds, put Mr. Trump ahead of Ms. Clinton. Markets have been confused throughout much of the day. Silver, considered a safe haven, was a top ten performer early in the day as natural gas tanked. Things have corrected a bit, with stock markets in the green, perhaps boding ultimately Ms. Clinton victory. VIX, an index measuring volatility, is currently the biggest loser today.
Brexit, the colloquial term for the United Kingdom’s withdrawal from the European Union, culminated in massive selloffs on global stock markets in June 2016. 52% of votes were cast in favor of leaving the E.U.
The referendum took place on June 23. Leading up to the vote, the price of Bitcoin increased from under $550 to more than $760 on June 20. By June 23, the price corrected hard. It tumbled back to the $550 mark and rebounded up to approximately $690.
Leading into election day, and election results announcements, Bitcoin’s price once more began to increase. On November 4, the price increased to $730 before correcting to $680 and making its way back to its current price of $700. All-in-all, the Bitcoin price doesn’t seem to be telling us much about the election results. Many leading banks have expressed the race is simply too close to call, although they believe Hillary Clinton to become the likely president-elect.
Financial institutions are predicting market volatility should Mr. Trump prevail.
“We believe that if Trump wins, markets are likely to fall further- one should not use the Brexit template where stocks bounced quickly,” a JPMorgan note states.
Keith Parker, global equity strategist, predicts the S&P 500 decreases 11 to 13 percent if Trump wins.
Citi see volatility either way: “The tail risks of a Trump victory or a Democratic ‘sweep’ could result in a market correction in the 5 percent range (similar to Brexit), after which the investment community reassess the environment,” Chief U.S. Equity Strategist Tobias Levkovich wrote in a note.
Goldman Sachs: “Our central election expectation continues to be that Sec. Clinton wins the White House, with a slim Democratic majority in the Senate – quite possibly a 50-50 split with the vice president breaking the tie…”
Geopolitical events have proven they can influence a market like bitcoins, such as Cypriot Financial Crisis, the Greek debt Crisis, both of which led to price spikes in the digital currency. Both Presidential candidates have commented on Bitcoin, but neither have expressed opinions that would lead one to determine financial technology regulation is going to change in a major way quickly.
Image from Shutterstock.
Last modified: November 9, 2016 11:10 UTC