Tags: Mark Hulbert | Donald Trump | Hillary Clinton | election

Mark Hulbert: Don't Give Up on Stocks If Donald Trump Wins

Mark Hulbert: Don't Give Up on Stocks If Donald Trump Wins

Donald Trump, Republican candidate for president (left), and Janet Yellen, chair of the Federal Reserve (AP file)

By    |   Tuesday, 20 September 2016 12:32 PM

Presidential elections can mean greater volatility for stocks, especially when the handover of executive power happens at the same time as a recession.

While Wall Street heavily favors Democratic candidate Hillary Clinton, equity investors shouldn’t fret if Republican Donald Trump wins the November 8 ballot, says Mark Hulbert, a columnist at MarketWatch.

The Dow Jones Industrial Average performs better if the incumbent party wins the White House, he says, as investors confront less uncertainty about economic policy. If the challenging party wins, stocks take longer to find their bearings and show gains.

“If this coming year is like the past, therefore, the stock market is likely — for a few months at least — to do better if Democrat Hillary Clinton wins,” Hulbert says. “If Republican Donald Trump wins, in contrast, it would likely take the market longer to find its bearings — but would eventually figure out how to survive and even prosper under his administration.”

In the first three months after the incumbent party wins, the Dow rises 7.3 percent, on average. If the incumbent loses, the Dow typically falls 1 percent. But a year later, those differences fade as the Dow posts gains, the data show.

Clinton’s lead over Trump in presidential polls narrowed in the past week as the candidates’ physical health became a central issue. Clinton collapsed on Sept. 11 at a memorial service in New York. Her physician later issued a statement saying Clinton had been diagnosed with pneumonia two days earlier.

Trump’s rise in the polls has led to a sell-off in bonds, says Vincent Chaigneau, global head of rates and foreign-exchange strategy at Societe Generale.

The French bank sees a rotation from monetary to fiscal stimulus underway, which means yields are poised to rise further — especially "if Trump continues to progress in the polls," according to Bloomberg News.

Trump's spending promises may drive economic growth so much that the Federal Reserve will have to raise interest rates more than investors forecast, while his protectionist trade proposals would create inflationary pressures, the newswire reported.

As such, a President Trump does "not look particularly bond-friendly," Chaigneau says.
 

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Presidential elections can mean greater volatility for stocks, especially when the handover of executive power happens at the same time as a recession.
Mark Hulbert, Donald Trump, Hillary Clinton, election
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2016-32-20
Tuesday, 20 September 2016 12:32 PM
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