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How Does The Stock Market Trade In October Prior To 'Too Close To Call' Elections?

How Does The Stock Market Trade In October Prior To 'Too Close To Call' Elections?

Following the first presidential debate on Monday, the presidential race is closer than ever. The latest LA Times/USC Tracking numbers out on Friday have Republican Donald Trump in the lead by 5 percent. A New Rasmussen Reports poll on Thursday has Democrat Hillary Clinton in the lead by 1 point.

UBS analyst Julian Emanuel expects the U.S. stock market to remain as volatile and unpredictable as the presidential race throughout the month of October. The S&P 500 has a history of volatile October trading ahead of elections in which candidates are within 10 percent of each other in major polls.

“In this respect, we expect September’s volatile awakening from Summer’s historically tight range to continue as investors digest both political uncertainty and the likelihood that 2017 earnings estimates will be revised lower as 3Q reporting season begins October 10th, making the near term outlook, like the political landscape, ‘Too Close to Call,’” Emanuel explained.

Related Link: How Political Ignorance Threatens Democracy

He calls the temporary September rise in bond yields encouraging for equities in 2017 considering the possibility of increasing fiscal stimulus from the likes of tax reform and/or offshore cash repatriation.

Traders looking to trade the October market volatility ahead of the election should consider the iPath S&P 500 VIX Short Term Futures TM ETN (NYSE: VXX).

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