The Bull Market Is Back
The weakness shown in Wall Street sessions over the past few weeks appears to be over. During the last full week of October, the bulls have been out in full force. Predictions that Hillary Clinton has the highest chance of winning the presidential race on November 8 have contributed to the bulls’ charge. Even as Donald Trump seems to be closing the gap in the polls, the markets are buoyant. Futures on major indices rise higher.
After the third and last televised presidential debate, futures rose on Wall Street. Interestingly, as Trump was presented as the debate’s loser, the USDMEX trend favored the Mexican peso, which reached its highest value in the past six weeks. Wall Street seems to favor Hillary Clinton. Her presidency is better for stocks because it represents preservation of the status quo. Forecasters equate a Trump win as having the same effect on the markets as Brexit did, except the bearish reaction would be global. (Source: “A Trump win would sink stocks. What about Clinton?,” CNN, October 24, 2016.)
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That does not mean Wall Street has gone fully Democrat. Congress currently is dominated by Republicans. The markets might turn bearish if Democrats—which include senators and representatives far more to the left than Clinton—were to regain Congress. Congress is, after all, the body that enforces the kinds of regulations and taxes that affect the world of finance and corporations.
Still, Europe may have more to do with the bullish sentiment rather than the U.S. election. Last week, fear that the European Central Bank (ECB) would end its quantitative easing (QE) in March made many investors nervous. However, the ECB’s governor Mario Draghi gave clear signals this week that Europe is not ready to let go of QE just yet.
Rising home sales, the report for which was released on October 27, showed a nice bounce. The home sales index for September rose 3.1%. The Commerce Department suggests home sales are almost at their highest in the last nine years. The reason house sales are so important is that they are a barometer of actual economic growth. Based on the latest data, economists say that real GDP growth in the third quarter hovered at about 3.3%. (Source: “U.S. housing, trade data boost third quarter GDP growth prospects,” Reuters, October 27, 2016.)
The major blip on the bullish scenario is the continuing pressure against oil prices. Oil remains at around $49.00 after showing signs of moving higher. Conversely, a Trump win could bring in a grizzly bear of a market, but a bull for gold futures.
