The elections are stirring up the situation already

The American presidential elections are on the one hand, still far away but on the other, whoever is justifying whatever by the upcoming elections. For example, something so geographically distanced from the America like European stocks is making excuses by blaming the American political situation for its condition.

Are you saying it makes no sense? But it does! I repeatedly mentioned here that the financial markets would rather see Hillary Clinton as the winner of the elections than Donald Trump who they consider to be less predictable. Financiers are especially scared of Trump’s love in various quotas, duties, and other limitations of the free market. The latest news about the new investigation of potentially sensitive emails sent from Clinton’s private email account are lowering her chances of winning in the eyes of the financial world a little bit – so in the spirit of this logic the European stocks are dropping. Because who would suffer more from the duties imposed by Americans: American or European companies? Obviously the European ones. That’s also why the stocks of the European companies are suffering more when they think about Trump’s possible victory.

I am still being very careful. Statistically, according to the survey of the public opinion there are bigger chances that Clinton will win and in that case, the financial markets would probably not even react or they would react very slightly with relief – which would manifest in slight appreciation of the dollar and stocks. Basically no real movement. If the other variant happened – and we who are still remembering the surveys of public opinion about Brexit are still considering this option too – the reaction would be very similar to the one which came after the British referendum. It would be a pretty sharp reaction and from the point of view of the dollar, stocks, and bonds a negative one.

But to be fair it is not only the politics which is making the situation worse here. There are many other tangible things in the picture which are causing this tension. For example, the weakest revenues of German retail sector in two years which are sharply in contrast with other indicators of the same economy. While according to various indicators hinting the confidence of businesses and households in Germany it is not as bad in Europe, on the contrary, considering the weak revenues it seems like the crisis is already beginning. Such ambiguity is not helping the financial markets to feel safer.

So it seems that we have at least a couple of restless days ahead of us. I have already warned here that some of the stock indexes are getting dangerously close to their so-called “support levels” – which are levels that will launch automatic trade orders that will more or less without the human interfering start selling stocks in an attempt to stop even bigger loss from happening if they are reached. Except when the automatic sales will be launched the prices will start spontaneously dropping even more. For example, the index S&P 500 is getting close to that level. It is only 10 points away from the potentially dangerous level of 2120 points. If it god forbid happened at the same time as Trump’s victory then the stock markets would experience something which I can call sort of unprofessionally only as “pretty messy”.