With just a few weeks to go the Presidential Election it feels as if it’s now Clinton’s to lose. The Trump campaign has been battered by wave after wave of negative news stories which have led to a complete fracturing of the Republican Party. While Mr. Trump may still have the support of a significant proportion of the electorate, elected members of the party he represents are turning their backs on him in increasing numbers. What this could mean for the future of the GOP is a debate for another day. But it feels as if senior members are happy to lose this election with a view to come storming back in 2020. Part of the thinking on this is that the next few years are going to be a disaster economically, and Mrs. Clinton (and the Democrats) will shoulder the blame. This seems logical. But four years is a long time to wait – especially on Wall Street. The worry now (and what has upset markets to some extent) is that the Trump campaign will implode completely and open the door for the Democrats to wrest back control of the Senate and House of Representatives. This would mean that Mrs. Clinton may be able to push through some of her more controversial (and expensive) policies. In reality, this is probably about as likely as a November rate hike from the Fed. After all, Mrs. Clinton is widely disliked and distrusted. Anti-Trump Republicans are more likely to stay away from the polling booths than stick pegs on their noses and vote for Hillary.

It would be foolhardy to write off Trump just yet though. Much now depends on what the press and WikiLeaks release on the two candidates over the next few weeks. It could be something or nothing. But we’re already seeing a pick-up in volatility as the Dow and S&P500 trade down to the lower end of ranges that have held throughout the summer. I would expect volatility to pick up further. There are sectors which will do better under one candidate than the other, and even stocks within sectors which will outperform depending on who wins. But what really matters is what the Fed does next, not who wins this election. The only caveat to this is in the unlikely event that Mrs. Clinton helps the Democrats take control of the House and Senate. That will unnerve investors, and while it may be unlikely, it’s probably worth hedging against.

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