Global markets were up significantly and the Standard & Poor’s 500-stock index broke its longest slide in nearly 36 years on Monday as investors bet on a Hillary Clinton victory over Republican Donald Trump going into Tuesday’s election.
“This is the Comey celebration,” said Washington investor Michael Farr, referring to FBI Director James B. Comey’s letter to Congress on Sunday saying his agency’s investigation of Clinton’s emails was complete and there would be no prosecution.
Market volatility has been high since the Oct. 28 announcement that the agency was looking into another batch of emails of possible relevance to the probe into Clinton’s private server, which threw fresh uncertainty into the race for the presidency. The CBOE Volatility Index, or VIX, had risen for nine consecutive days, signaling high investor anxiety.
“The FBI gets out of the way and markets are seeing a clearer path for a Clinton victory, which is what markets have expected for some time,” said Farr, chief executive of Farr, Miller & Washington, a D.C. investment advisory firm.
A Wall Street Journal-NBC News poll gives Clinton a 4-point lead over Trump heading into Tuesday’s election.
Markets were up across the board Monday on the Comey news, with the S&P 500 climbing 2.2 percent in trading, one of its biggest daily moves of the year. The tech-heavy Nasdaq gained 2.4 percent. Europe and Asia climbed. The Dow Jones pushed back above the 18,000 threshold.
Short-term turbulence surrounding elections is not indicative of a longer-term trend, Bloomberg News reported.
“In the 22 elections going back to 1928, the S&P 500 has fallen 15 times the day after polls close, for an average loss of 1.8 percent. Stocks reversed course and moved higher over the next 12 months in nine of those instances,” it said.
The day-after election movements in the S&P 500 in particular are not a reliable signal of what is ahead.
“While the index swings an average 1.5 percent the day after the vote,” Bloomberg said, “gains or losses over the first 24 hours predict the market’s direction 12 months later less than half the time.”
Marvin McIntyre, a managing director in Morgan Stanley’s wealth management group, called Monday’s market shift “a relief rally, similar to pre-Brexit. The market loathes uncertainty,” he said, “and there is no more of a wild card than Donald Trump.”
In addition to a jump in stocks, the price of oil and the U.S. dollar both gained. Gold sold off.
Neither a Clinton nor a Trump win will fully remove the element of uncertainty.
“The popular belief is that a Clinton victory will give a short-term spike, whereas a Trump victory would result in short-term, sharp decline,” McIntyre said. “Beware of the consensus.
“Whoever wins brings a trash can full of uncertainty, the market’s nemesis, so it is doubtful that volatility will diminish.”