Tags: election | VIX | uncertainty | volatility

Uncertainty Heading into the Election

By    |   Tuesday, 06 Nov 2012 07:46 AM

The day is finally here. Today is Election Day in the United States and it is time to elect our president for the next four years. Like you didn’t know what today was.

Some people believe that the election will have a great impact on the market, depending upon the outcome. Personally, I don’t think it matters which candidate wins as long as the uncertainty is removed.

This election appears to be extremely close and we may not know who the winner is for several days. That would mean the uncertainty sticks around longer than we would like.

If we see a replay of the 2000 election, where the winner isn’t known for several weeks, it could have a big impact on the market and it would likely be a negative impact.

If we look at what happened in November 2000, we see that from Election Day until the end of November, the Standard & Poor’s dropped over 8 percent. Granted we were already in the midst of a bear market, but the uncertainty certainly didn’t do anything to help.

One sentiment gauge I have been watching closely over the last week is the Chicago Board Options Exchange Volatility Index (VIX).

The VIX dropped sharply last Thursday when the market rallied, but then bounced right back on Friday when the market dropped.

Monday was indicative of how the uncertainty is impacting the market, as the market was little changed yet the VIX jumped sharply on the eve of the election.

The market doesn’t like uncertainty, and I think the jump in the VIX reflects how investors are uncertain about the election.

It will be interesting to see what happens with the VIX over the course of the next week.

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The day is finally here. Today is Election Day in the United States and it is time to elect our president for the next four years. Like you didn’t know what today was.
election,VIX,uncertainty,volatility
289
2012-46-06
Tuesday, 06 Nov 2012 07:46 AM
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