Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

This Election Marks the Beginning of Market Volatility

Stock-Markets / Volatility Nov 08, 2016 - 09:13 PM GMT

By: John_Mauldin

Stock-Markets

BY JARED DILLIAN : Volatility is high going into this election (because nobody knows what will happen, and there is a lot at stake). People think that after the election, the uncertainty will be out of the way, and volatility will subside.

Will it?


Here are the ways this election could go wrong

Let’s think about this a little bit.

There are a bunch of ways that this election can go wrong:

  • Gary Johnson wins New Mexico, neither Clinton nor Trump can get to 270 electoral votes, and the election is thrust into the House of Representatives
  • Evan McMullin wins Utah, neither Clinton nor Trump can get to 270 electoral votes, and the election is thrust into the House of Representatives
  • Clinton wins, and Trump refuses to concede
  • Trump wins, and Clinton refuses to concede
  • States like North Carolina and Florida are a tossup, and the outcome of the election isn’t known for weeks
  • Reports of election fraud (on either side)
  • Reports of foreign interference in the election

And that doesn’t include the things we haven’t thought of (including the dreaded electoral college/popular vote split), and can’t think of, because they’re true black swans.

For those of you who were around during the prolonged recount of 2000—do you remember the effect the election had on the equity markets? It was not bullish.

I was in New York at the time, interviewing at Lehman Brothers. I remember that the market was not happy. Lots of red on the screen.

If this were an ordinary election, sure—I’d say by the following morning we would have a winner, and life would go on. But this is no ordinary election.

And of course, none of this includes the scenario I discussed in my article last week, "The Fed Is More Hawkish Than You Think,"… the possibility of a Democratic sweep, which a Goldman Sachs poll recently put at a 2% probability.

I don’t think the election is the end of volatility—I think it is the beginning of volatility. The only way it is the end of volatility is if there is a clear and decisive winner, and the loser concedes immediately.

But what are the chances of that?

If you want to play this through one of the myriad volatility ETFs, be careful. (We will be discussing this more in the not-too-distant future.) Just know that it’s probably a good idea to get out of the pool. Expert swimmers only.

The future of the US political system

I am a crappy political scientist. But I am no dummy.

I started thinking about who the Republican presidential candidate might be in 2020, like perhaps Marco Rubio. Then I started to wonder if the Republican Party would even be around in 2020.

I think there is a very good chance that it splits in two and ceases to exist. On one side, you would have the right-wing populists (represented by Trump), and on the other side you would have the classical liberals (represented by Paul Ryan, who is foolishly supporting Trump).

But the Democratic Party is under pressure as well. The Democrats will likely last another four years, but it’s also possible that they could split someday into a center-left party and a far-left party (the Bernie supporters).

Of course, the US political system doesn’t function well with more than two parties. We do not have a parliamentary system (though some people wish we did).

There is a lot of daylight here for a centrist party. Many voters didn’t participate in the primaries and were pretty appalled at how extreme the rhetoric got, both on the right and the left.

I’m not smart enough to really predict the future, but I wouldn’t be surprised if our two-party system had changed beyond recognition for 2020.

We do change political parties every so often in this country—lots of people have been talking about the Republicans and comparing them to Zachary Taylor and the Whigs. It happens once in a generation. Now might be the time.

Inflation will go up post election

Well, you can be sure that one thing is going to happen no matter who wins the election:

Inflation will be going up.

If Donald Trump wins, we will have 35% tariffs on TVs, which will increase in price accordingly. Protectionism sounds great in theory, not so great in practice. The price of all imported goods will rise sharply—especially electronics, where people have become accustomed to prices going down for years.

But Hillary Clinton is also good for inflation. Regulation increases the cost of everything. This is known as “inflation by fiat.” There are a million examples of it. Those costs of compliance feed into everything we buy. The regulatory state has expanded massively in the last eight years, and it will continue to expand under a Clinton administration.

One thing is for sure—inflation is not going down. The only question is, how fast will it go up?

It is starting to get priced into the TIPS market:

Which is something the Fed watches closely.

You can look at this any way you want. The Fed is either hiking rates preemptively (because of inflation) or belatedly (because of unemployment). But barring any complete collapse in a major economic indicator (like nonfarm payrolls), I fully expect the Fed to hike interest rates in December.

And if this hasn’t been a particularly upbeat piece, you can guess where I stand on the stock market.

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

© 2005-2019 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules