Its Election Day, So Why Are The Markets So Quiet?
All’s quiet in the markets so far today as the United States votes in the midterm elections. This election promises to be a huge shake-up, with the House flipping (with some predicting even the Senate too), so what gives?
The short answer is: nothing.
If you look back to the DIJA back on election day 2016, you see the same pattern – a huge (or “yuge”) event that dominates the news for months finally arrives. There has been non-stop coverage, with every analyst and their mother getting in on the action, looking at every possibility from every possible angle.
For an investor, this is fantastic. All this analysis by so many people means the investing world has an extremely good view of the risk associated with either outcome. In finance terms, this makes big election outcomes a “well-defined risk”. All the big bankers and investors have been hedging their bets for years, with everything updated with the MASSIVE amount of polling and election data. While nobody knows the exact result, everybody has already positioned themselves based on the best possible data.
Since the election is such a big event, it completely dominates the news cycle too – that means it is extremely unlikely that anything else would get noticed that will really shake up the markets. All of this leads to really boring days in the markets, with stable volumes and prices while everyone holds their breath for the results to be announced.
For an investor, election day should be pretty calm and easy. It is the day after that you need to worry about.