Going into the debate, it was widely accepted by traders that if Trump continued his momentum after last night, it would be a negative for the markets. It’s not that the markets don’t like Donald Trump, they just don’t like the uncertainty that he brings. Mr. Trump’s push in the polls over the last week was attributed to the recent sell off in the market. A debate win could have put him in the lead and done some serious damage to the markets.
The verdict is in before the polls: Clinton Won
Rather then analyze what the candidates said, let’s take a look at how futures markets reacted as the debate went on. Before the debates, I watched four different futures contracts to give me clues to who was winning: Gold, S&P 500, VIX, and the Mexican Peso. The thought was, if Trump won the debate, markets would go lower and fear would rise (VIX, Gold).
S&P Futures- The main indicator of the markets, the S&P futures, were actually trading down about 0.40% before the debate. However, after an hour into the debate markets turned 0.50% higher as Clinton seemed to be winning.
Gold Futures- Since last Wednesday, gold was up 2%. This was a combination of the Fed holding off on rates and Trumps momentum. I was watching for a spike with a Trump win, but when Trump started to struggle, gold sold off.
VIX Futures – The fear gauge is always a great indicator to look at during big trading events. Before the debate, VIX futures were trading at 16.50, but fell 2% during the debate, to under 16. If the polls stay tight volatility will stay elevated, but if Clinton takes back a big lead, expect the VIX to get smashed.
Mexican Peso- Trump policies would damage the Mexican economy and its currency. As Trump gained momentum, the Peso weakened. Last night, the Peso charged almost 2% higher during the debate, a sign that Clinton had won.
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