We have a week left before America makes up her mind on the next President. Unlike previous elections, this one seems to be going to the wire. And we don’t quite know the ground realities. A polarised polity and media have made judging the public mood almost impossible.
Under the circumstances, second-guessing the market reaction to the electoral outcome is doubly challenging. The policy promises of the two sides on market-sensitive issues like taxation are divergent. So, the result becomes a crucial pointer to the future direction of the stock market.
The US markets are driving global sentiment, and the world will take cues from how the US reacts to its electoral result. Who wins the presidential race and who controls the Senate will influence how markets react. For the moment, the world is still unsure about how things will pan out in the last week.
Once the election trends harden and give clarity, the markets are sure to react. Under the circumstances, defensive bets are a better option than buying overvalued themes. In the interim, it could be tentative or even weak. Raising our defence may be a good idea to tide over this phase. The markets will certainly absorb the result and move on.