What U.S. election outcomes could cause market volatility?

In this week’s video update:

  • U.S. GDP numbers strong but not surprising.
  • Eurozone Purchasing Managers’ Index (PMI) numbers show growth in European economy.
  • Potential U.S. presidential outcomes and their potential impact are considered.

On this week’s update, Todd LaFountaine, program director, capital markets insights, interviews Managing Director, Investment Practice Adam Goff to examine the potential market impacts of the U.S. presidential election.

U.S. GDP update

Goff begins with a look at the third-quarter U.S. GDP number. At 2.9%, Goff said it was stronger than most analysts predicted. This was a good sign for the U.S. economy, but Goff believes the going forward number will remain a little over 2%. In addition, a slight tick up of the Employment Cost Index (ECI) gave further evidence that inflation is moving up. Goff believes this provides more support for a December interest rate hike by the U.S. Federal Reserve.

Eurozone PMI numbers

With flash PMI numbers coming out from Europe this week, Goff stated that the Eurozone PMI number was at 53.7, placing it above the critical 50 level—a significant sign that the European Economy is growing.

U.S. election outliers

Goff observed that the U.S. presidential election may have been entertaining to date, but has had little impact on market volatility. He stated that the market seems to believe the most likely outcome is a Hillary Clinton White House and a Republican-controlled Congress, which would come closest to maintaining the status quo.

Goff laid out the two outlier outcomes that would most like cause greater market volatility: either a Democratic sweep of the White House and one or both houses of Congress; or a Trump victory in the White House and a Republican-controlled Congress. Russell Investments’ strategists will continue to keep a close eye on the events to see how the facts on the ground change.