The markets had priced in a Clinton victory in the presidential election. Who wins makes a big difference to the Stock Market because experts expect a Clinton presidency to drive up stock prices by an average of 11% while many expect the market would fall if Trump were to be elected. Thus many expected stocks to rise a bit on the way to Election Day. What has upset the apple cart in this case is the announcement by the head of the FBI that during the investigation of another case, agents have come across what might be more Clinton emails. The issue is not that there is any smoking gun and strong evidence of wrong doing but rather that head of the FBI made this announcement on the eve of a hotly contested and bitter presidential election. Where will this take the market?

October Slide

CNBC reports that U.S. stocks slide in October based on the recent Brexit uncertainty and now the Clinton email server issue being revisited.

U.S. equities closed around breakeven on Monday, after gyrating between slight gains and losses as an investigation into new Hillary Clinton emails kept investors on edge.

“Punch drunk from the highly unanticipated Brexit outcome, institutional investors will take a wait and see approach until they have more clarity on how the balance of power in Washington will settle,” said Jeremy Klein, chief market strategist at FBN Securities.

FBI Director James Comey said in a Friday letter to lawmakers that the agency is probing new emails related to the Democratic nominee. The emails were discovered during a separate investigation involving former Congressman Anthony Weiner.

“The market has been pricing in a Hillary Clinton victory and that got thrown into disarray,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “I think everybody is going to be glued to the news with this Hillary Clinton email scandal. The S&P fell 20 points in a second” on Friday.

Is it time to short everything in sight or will the market settle down? The barrage of criticism against the FBI director has been intense and may work to Democrats’ advantage in the election but the market likes predictability and this sort of news thrown into a late election campaign blitz is likely to drive investors out of stocks and into cash.

Game Changer

Market Watch refers to the renewed Clinton email issue as a game changer that could derail stocks.

This is really a game changer. The market was not ready for this surprise.

This news comes on the heels of strong jobs and housing reports. A Clinton election was predicted to bump stocks up 11%. With any uncertainty as to that result added into the mix we may well see a pre-election slide in stocks. This may be a good time to buy options and sit on cash until we see who wins the presidency and if the Democrats regain control of either the Senate or less likely the House of Representatives which would lead to a less confrontational next four years.