Stock market october 2016 crash

Wall Street's long-running view that Hillary Clinton would easily become the next president has been replaced by a new fear that Donald Trump could win, and it probably won't be a pretty picture for stocks if he does.

Bond yields have moved lower and so have stocks, as the markets have begun to react to the possibility of a Trump victory in the last several days. The work of two economics professors may provide a glimpse of how the stock market might react if Donald Trump were elected.

They studied the predictions market, including PredictIt. One of the economists says their findings point to a sharp immediate sell-off if Trump wins and a slight rally if Clinton wins. The amount of the rally or sell-off depends on the predicted outcome. He and Justin Wolfers of the University of Michigan studied the market effect of the first debate in a Brookings paper.

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Clinton's odds in the prediction markets had been closer to 80 percent, and at that level, a Trump victory would have triggered an 8 to 10 percent sell-off, he said. The market's nervousness picked up after the FBI last Friday revealed a new investigation into Clinton's email server , this time involving her longtime aide Huma Abedin and her husband Anthony Weiner, who is under federal investigation in a different matter.

They are starting to price in the potential for a Trump win. That process started last Friday," said Tony Roth, CIO of Wilmington Trust. We haven't seen any calamitous days either.

Strategists agree there would be a sell-off with a Trump win, but then the views diverge on how the market would trade after that. Ethan Harris, head of global economics at Bank of America Merrill Lynch, said he would expect a sell-off if Trump wins, then an L-shaped move in the equity market, because of the period of policy uncertainty. Normally the equity market responds positively to a Republican doing well in the election," he said.

Markets had been looking for a win by Clinton but also Republicans holding the House and possibly Senate. The idea is that that would create gridlock and many of her policies could not be enacted.

Harris said he would expect to modestly lower his GDP forecast if Trump wins. Bruce Bittles, chief investment strategist at Baird, has a different view and he believes a Trump victory could result in a V-shaped move in the market, as Wall Street reflects later on positive tax changes and the looser regulatory environment Trump supports. The market initially goes down and then goes up," he said. He said with a Clinton win, the market would rally but not as much as it historically has when an incumbent party wins.

If that's the case, then I would say a Republican win would mean a sharper down, but then a sharper up to follow," Bittles said. Roth said if the odds of a Clinton victory continue to move lower, so will the stock market. If Trump wins, then you get a big sell-off. I think that from where we are today, until the bottom of that sell-off, you are looking at a good 10 percent easily. I think whether it goes deeper than that depends on the temperament that Trump displays after the election," Roth said.

The odds had been as low as 60 percent in September. Zitzewitz said he studied the reaction of markets when a tape was revealed in which Trump made lewd comments about women , and also the reaction Friday when the FBI news broke. The market moves confirmed the study he did after the first debate of the prediction market and financial markets.

He said his study did not go into what would happen after the initial reaction, and it would react to other events like the concession speech and other developments.

Roth said he expects the market to remain choppy and possibly sell off through Election Day, Tuesday. It's probably three out of 10 and likely to move higher … that could cause a real panic in markets," he said. Roth said markets could remain under pressure if Trump wins, especially if does not surround himself with credible advisors.

Trump could also take action against U. He said that could cause a downward spiral in trade , which could hurt weaker economies. We think we're in the final chapter of monetary insanity," he said. He said easing by global central banks was necessary but now it's no longer effective and a move away from it would be positive.

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Register Log In Profile Email Preferences PRO Sign Out. This is what could happen to the stock market if Donald Trump wins Patti Domm pattidomm.

Is election drama moving markets? Tuesday, 1 Nov 7: Patti Domm CNBC Markets Editor. To view this site, you need to have JavaScript enabled in your browser, and either the Flash Plugin or an HTML5-Video enabled browser. Download the latest Flash player and try again.

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