There is a rather tight connection between Washington and Wall Street, there is not surprise really because the ‘street is where politicians’ bread is buttered. With all the rhetoric and hyperbole tossed around we can believe only one thing – Wall Street has influence. We heard Bernie Sanders and others bashing banks, brokers and their ilk during his campaign, yet all we heard was silence from the other side. No sense throwing gasoline onto a raging fire. Yet, he fell by the wayside, and we are left with Hillary Clinton and Donald Trump, one of them to lead our nation into the end of this decade.
Odds seem to favor Mrs. Clinton with less than three weeks remaining, and that probably suits Wall Street just fine. Aside from the partisan talk, she is a known commodity on the street and is less likely to make wholesale changes or regulate the industry standards with new rules. Mr. Trump is a well-known businessman but an unknown for ‘the street, and that may create some fear in the investment community. Today’s market shows much less fear however, and that is probably due to the likelihood of a Clinton victory. Volatility in front of the election took a nosedive this past week.
But the canary in the coal mine is the Fed, and loose lips (from the FOMC) are threatening to sink the ship. It’s astonishing how any of the members can speak confidently about a rate hike in December, when so much is yet to be revealed (data). Some at the top of the Fed (Yellen, Fischer) may think otherwise, and that creates doubt for the markets. Currently, the markets see more than a 60% of a rate hike, and that will change often over the next five weeks. It is this uncertainty that is unsettling to markets, but then what else is new! With more clarity the doubt will be removed.
