Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The 2000 Election Sell-off Might Repeat—Here’s How to Profit

Stock-Markets / Stock Markets 2016 Nov 08, 2016 - 08:50 PM GMT

By: John_Mauldin


Perceptions about the US presidential election have a major impact on markets. The recent news about the FBI not probing Clinton’s emails any further drove US equity markets up by 1% to 2%. Over the last couple of months, stock markets have moved down when Trump is gaining in the polls and up when there’s good news for Clinton.

But what happens if there is no clear winner in the 2016 US presidential election? Jared Dillian, ex-head of ETF trading at Lehman Brothers, says a delayed outcome is the most likely result of the election. Beyond that, this delay will lead to volatility in the markets.

In a recent interview with Mauldin Economics, he argues that most analysts believe there will be a lot of volatility prior to the election, then trading in markets returns to normal afterwards. While this might be true in a normal election, Dillian says this election is not normal and to expect a delay of a few weeks before a winner is known.

Noting that Trump has already said he will not concede, Dillian argues it is also likely that Clinton will not concede if Trump ekes out an electoral vote victory. He mentions several other things that could lead to a post-election delay, such as a victory by a third party candidate in Utah or New Mexico, or lawsuits about voter access or election fraud.

As Dillian notes: “People are used to having a peaceful transfer of power in the US, but … this is the last election to be betting on that.”

Equity markets down during delay in 2000 presidential election outcome

Dillian says that we may see a repeat of the long delay after the 2000 Gore-Bush presidential election. He also points out this uncertainty could hurt financial markets. He notes: “…there was a lot of pressure on equity markets for weeks after the election in 2000, and that’s a good precedent for what could happen here.”

Best way to cash in

When asked about the best way to play the election and profit from the shaky markets, Dillian said to avoid “volatility ETFs” that have built in “hidden risks” making them very risky.

He goes on to suggest the best plan is to “use plain vanilla calls or puts” with delta exposure, so you avoid the hidden risks in volatility ETFs like term structure and skew. While not a “pure vol” play, by using puts / calls you are “making a plain bet on the direction of the market and volatility.”

Dillian ends the interview by saying: “I will be very surprised if we have a clean winner on Wednesday morning.”

Watch the full interview (4:26) with Jared Dillian below.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in