- The odds on Trump continue to shorten
- There is a 30% chance of Trump becoming Commander-in-Chief
- Clinton is unable to shift the story to Trump's many short-comings
- There could be a quick 3-5% fall in the Dow Jones and S&P 500 if Trump wins
- The US dollar would also see a sharp fall
- The financial markets have softened but they are still ignoring the risks
Traders Ignore 30% Chance of Trump Being Commander-in-Chief
The bookmakers have shortened the odds on Trump and now give him a 30% chance of being President.
I.e. there is a slightly higher chance of Trump being President than there is of a typical Premiership football match ending in a draw.
If Trump is made Commander-in-Chief, then I wouldn't be surprised to see a quick 3-5% fall in the Dow Jones and S&P 500. The dollar could also see a sharp fall.
The problem is that the markets seem to be sleepwalking into this risk event much like they did with Brexit.
Email Scandal Keeps Clinton on the Back Foot
Before the Hillary Clinton email scandal came back to the fore on Friday, the Trumps were given a 15-20% chance of getting the keys to the White House.
Since then, Hillary has been unable to shift the story to Donald Trump's many short-comings.
Even when the story changes to one that questions the FBI's timing, it just reminds voters of "Crocked Hillary".
It is difficult to see how Clinton will regain control of the narrative unless a significant anti-Trump story breaks.
Of course, it is possible that both camps are still holding one large piece of mud that is yet to be thrown.
Minor Stock Market and Forex Adjustment
The markets have reacted to the FBI email investigation but only in a fairly limited manner.
Since the close on Thursday evening, the Dow has dropped about 1.0%, the S&P 500 is down about 1.3% and the NASDAQ 100 is off by about 1.5%.
In the forex markets, the euro and sterling are up 1.6% and 2.1% respectively against the dollar.
The dollar has dropped about 2.0% against both the Japanese yen and Swiss franc.
Gold, which some regard as a safe-haven is up about 1.5%.
However, given that gold is priced in dollars, and the dollar weakness that we've seen, it's difficult to read too much into that move.
Complacent Markets
The above moves do not look like the markets are preparing themselves for a big risk event.
Given that we could see some rather brisk selling, the markets look complacent at best.