Wall St. Treads Water Awaiting Election Outcome

While markets are pricing in a Clinton victory, the specter of a ‘Brexit’ surprise looms.

Reviewed by: Yashaswini Swamynathan
Edited by: Yashaswini Swamynathan

(Reuters) – Wall Street was little changed in light trading on Tuesday morning as investors treaded cautiously while awaiting the outcome of the U.S. presidential election, with the odds tilting toward Democrat nominee Hillary Clinton.

Clinton, favored by investors as they see her lending greater clarity and stability to the markets, has a 90% chance of defeating Republican nominee Donald Trump, according to the final Reuters/Ipsos States of the Nation poll released on Monday.

Trump's stance on foreign policy, trade and immigration is more uncertain.

Clinton was on track to win 303 votes in the Electoral College to Trump's 235, clearing the 270 needed for victory. The former secretary of state also leads Trump by about 45% to 42% in the popular vote.

Low Volume, Sideways Trading

"My expectation for today is that the market will probably trade mostly sideways on relatively low volume, but with a slight increase in volatility," said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

At 11:11 a.m. ET, the Dow Jones industrial average was up 26.16 points, or 0.14%, at 18,285.76. The S&P 500 was up 1.21 points, or 0.06%, at 2,132.73 and the Nasdaq Composite was up 1.01 points, or 0.02%, at 5,167.19.

The CBOE Volatility index, dubbed Wall Street's "fear gauge," reversed course to drop 2.6%, after having notched its biggest one-day drop since late June on Monday.

However, despite the polls indicating a Clinton victory, traders remain wary, noting Britain's shock vote in June to leave the European Union that had wrong-footed bookmakers and most pollsters.

Bracing For ‘Brexit’ Surprise

"The polls are close just like they were during Brexit, and while some people can argue that the makeup of the electoral college will make it difficult for Trump to win, the fear of the unknown is certainly making investors cautious," said Ernie Cecilia, chief investment officer of Bryn Mawr Trust.

Wall Street is also coming off its best day in more than eight months on Monday after the FBI said it would not press criminal charges against Clinton over her use of a private email server.

The iShares MSCI Mexico Capped ETF (EWW), known of late as the "Trump ETF," inched up 0.17%, a day after notching its best day in more than five years on Monday. The ETF is viewed as a barometer of Trump's chances of winning the election since his policies are considered negative for Mexico. For the year, EWW is up 7.52% versus a return of 6.92% for SPDR S&P 500 ETF Trust (SPY).

Chart courtesy StockCharts.com