Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
What the Election Outcome Could Mean To the Grain Markets
Nov 05, 2012
Predicting the outcome of the US election, is everyones question, and has been asked by many readers. If you are wanting to take a look at all of the polls, both on a national and state level Click Here
. Its obviously not about my personal opinion, but rather what the market is thinking, and more importantly what will happen once a winner is announced. If you don't believe the stock market will initially rally "MORE" on a Romney victory, then you are completely disregarding what the markets are telling us. The stock market and money-managers across the board are very concerned about the proposed increasing "dividends tax" and "capital gains tax" that will come along with an Obama victory. If you think these taxes will encourage more money flow to come into the US stock market than the pro-business minded Romney, you are simply dead wrong. The "market" also believes an Obama victory will mean a weaker US dollar in comparison to a Romney victory. Most money-managers believe Romney has a better chance at reducing our overall debt by making more direct cuts to the budget. In return, a Romney win is promoting traders to believe the US dollar will strengthen potentially causing money to flow OUT of commodities and back into equities. On the flip side, an Obama win could cause the US dollar to weaken, allowing other nations to import more US supplies at a cheaper rate, and in return prompt investors to put more money at risk in the commodity markets. Understand what I am saying here...this is the overall feel from the "markets" and the "what if's" and "how it could all play out" from those managing a large portion of the investment dollars in play. These are not my own personal opinions about who will win or lose, but rather how the trade is playing it all out. As far as what most seem to be expecting in regards to an actual winner, I would call it a complete coin toss. Below are what most of the political analyst I have talked to seem to be expecting or thinking could happen:
- Not Much Change: Obama retains the presidency. Possibly in some crazy outcome very similar to that of the Bush vs Gore fiasco in Florida, where we didn't know who would be president of the US for several weeks. The Republicans maintain a majority in the "House" and the Democrats maintain a majority in the Senate. Maybe the Republicans win an extra seat or two in the Senate, but probably lose a few seats in the House. Net-net not much of a big change, market participants make very few major adjustments.
- Republican surprises: The stock market would probably explode higher "IF" Romney were to win the election AND the Republicans somehow were able to win 5 or 6 seats in the Senate to win a majority there as well. This would obviously give the GOP's a clean sweep and control of the White House along with both the House and the Senate. US dollar would more than likely rally and commodity prices would setback as the funds reduce exposure.
- Democratic Surprises: Obama keeps the White House AND the Democrats expand their hold on the Senate and somehow pull off a major upset by winning a majority in the House, ultimately giving the Democrats a clean sweep. US dollar more than likely falls under pressure, gold and silver prices rally along with other commodity markets.
- Wild Card: John Boehner's job as Speaker of the House. If someone further to the "right" steps in and the Senate stays controlled by the Democrats any type of compromise could become more of a long shot. US stock market falls under pressure and funds take risk off across the board as more uncertainties loom.
Summary, this political race is extremely tight. There are so many variables and "what if's" no one is certain about the outcome. It may take a couple of days for all of the dust to settle and smoke to clear, but once the outcomes are announced I suspect traders will once again start to place their wagers... All I can say is be careful between now and the first few weeks following the announcement of the election results. You have to believe the bigger money will be flopping around in the waters and possibly changing their directions. More times than not this type of reaction can cause the little boats to have the hell beaten out of them. Best advice...stay out of the waters or remain extremely close to the shores unless you have a boat that can withstand the beating.
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