Markets Anxiously Await Election Results

November 6, 2012 12:01 AM
 

What Traders are Talking About:


* Election day 2012. The campaigning has come to an end (mostly) and it's finally time to head to the polls. Based on the final pre-voting polls, the presidential race appears to be very tight so every vote will count. From a market perspective, a lot of uncertainty remains regarding not only the leadership of our country, but also with the looming fiscal cliff and how that will be dealt with in the lame-duck session. If the presidential election isn't fully resolved tonight, as some fear, it will shorten the time Congress has to deal with the fiscal cliff and other issues, which would create even more market uncertainty. Markets don't like uncertainty so hopefully there's closure today on presidential election.

The long and short of it: Exercise your constitutional right and let your voice be heard. Get out and vote.

* Predicting the presidential election. There are many "studies" indicating who will win the presidential election based on certain criteria. One of the most popular has to do with the performance of the stock market during the two months prior to the election. This "theory" states that if the overall movement in the stock market is up for the two months prior to the election, the incumbent party wins. If the stock market is net down for those two months, the challenger party wins. Since 1900, this indicator has been 90% accurate with only three misses -- 1956, 1968 and 2004. Another popular "presidential predictor" is the "Redskins rule." It states that when the Redskins win their final game before a presidential election, the incumbent party wins the election, and when the Redskins lose their final game before the election, the challenging party wins the election. This "rule" has been in place since 1940, and has proven fairly strong.

The long and short of it: The stock market theory indicates President Obama will win reelection. The "Redskins rule" says GOP challenger Mitt Romney will win. Obviously, one will hold true and one will be wrong.

* Winter wheat crop ratings decline. As of Sunday, USDA said 39% of the U.S. winter wheat crop was rated "good" to "excellent" compared to 40% the previous week. Conversely, 19% of the crop is rated "poor" to "very poor" compared to 15% the prior week. When USDA's weekly crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 = crop failure, 500 = perfect crop), the HRW crop dropped 7 points to 305, while the SRW crop was unchanged at 376 points. The decline in the HRW crop was led by a 3-point drop in Oklahoma, while Texas and Colorado each posted 1-point declines. With the forecast for the next two weeks suggesting above-normal temps and dry conditions in the Plains, traders are anticipating more drop deterioration.

The long and short of it: HRW crop concerns are supportive for the wheat market, but it's hard the "kill" a wheat crop in the fall.

 

 

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