Jamel Toppin/The Forbes Collection

 

States that continue to hang in the balance include Virginia and Michigan are trending in Clinton’s direction, while Pennsylvania is moving in Trump’s favor. New Hampshire remains too close to call. But Trump has won a clear path to the presidency with 288 electoral college votes.

As voting has come in decidedly in favor of Trump, defying the expectations of almost every national poll and many state polls, it was the IBD/TIPP Tracking poll that may have won Tuesday. It predicted Trump’s victory in a final national survey on Tuesday afternoon.

Others who foresaw Trump’s outperformance in the general election, for instance DoubleLine Capital’s Jeffrey Gundlach, did not back down from their calls on Tuesday.

“I think we can all agree that Donald J. Trump has massively outperformed expectations in the past,” said Gundlach on a conference call with investors Tuesday evening. Such an outcome would “cause a downgrade of global growth expectations or maybe even a global growth scare,” Gundlach told FORBES earlier in the year.

Billionaire hedge fund manager Dan Loeb of Third Point LLC also said last week he reduced his market exposure and increased hedges ahead of the election, comparing the vote to Britain’s vote to leave the European Union in June.

“We clearly didn’t predict the outcome of Brexit, but we definitely saw that as a point in time where you had to ascribe some percentage to a scenario where there was a surprise. So we’ve done the same thing here,” he said on Nov. 4.

 

4:00 p.m. ET: Stocks closed higher heading into U.S. presidential election results with the S&P 500 Index closing up 8 points, or 0.39%, at 2,139. The Dow Jones Industrial Average rose 0.4%, closing at 18,332 and paring some gains near the end of trading. Indications of investor fear such as the CBOE Volatility Index, gold, and the Swiss franc all fell on Tuesday, locking in a two-day risk rally ahead of the election. “The market expectation is a Clinton presidency,” said Joseph P. Quinlan, chief market strategist at U.S. Trust, at the close of trading.

The Mexican peso, the asset most correlated to investor perceptions of who will take the White House, rose 1.2% versus the dollar. Stocks rallied after futures trading opened lower on Tuesday morning and volatility was on the rise. Those fears mitigated as traders took in polling data, which showed resilience from Clinton. In a Clinton win over Trump, U.S. Trust’s Quinlan expects a rally heading into 2017. “The global economy is being run by the U.S.” Quinlan said, noting improving employment and income data. “With this big event behind us we are positioned for higher equity prices by the end of the year, and I think dramatically so,” he added.

3:30 p.m. ET: The CBOE Volatility Index, or VIX, rallied in late trading as investors sought a way to buy protection against market risk heading into the close of trading. The VIX has tumbled over the past few trading sessions, in concert with rising equity markets, as investors began to price in a win by Democratic nominee Hillary Clinton. The VIX rallied from down as much as 6% on Tuesday to slightly in the green by 3:15 p.m. ET, but equity markets held onto their gains. Confidence was bolstered when a Las Vegas judge denied a request by the Trump campaign to impound ballots from some polling stations in Clark County, Nevada.

2:28 p.m. ET: 

Markets began to sell-off in mid-afternoon trading after Republican nominee Donald Trump sued the Clark County Registrar of Voters, seeking to impound and segregate ballots from early voting on Friday, Nov. 4. Trump alleged in a suit the registrar “unlawfully”  extended voting hours by allowing voters to enter lines after an 8 p.m. deadline. The lawsuit, targeting areas of heavy reported early voting, sent the S&P 500 Index off intra-day highs to 2,139, up 0.39%, and caused fear gauges like the CBOE Volatility Index to pare early losses.

Earlier

It’s Election Day in the United States and voters are taking to polling stations across the country to decide the balance of power in the White House, in addition to races in the Senate and House of Representatives. In global markets, a bumper Monday rally on strength by Democratic nominee Hillary Clinton took of the thunder out of early Election Day trading.

U.S. equity markets opened up moderately in early trading Tuesday after gaining over 2% on Monday as traders began to price in a Clinton victory. (Read FORBES’ Election Day Live Blog)

The S&P 500 Index was up 0.38% by noontime, while the Dow Jones Industrial Average gained 0.44%, or 81-points, at 18,342. In Europe and Asia most large marked indices closed trading higher. Trading prices across assets indicated a bullish bias from traders.

Oil gained slightly in the morning trading session, rising 0.16% at 45.05 a barrel for West Texas Intermediate and gold fell slightly to 1,277 a troy ounce. Meanwhile, the yield on the 10-year U.S. Treasury rose for a second day and similar duration government bonds in Brazil and Mexico fell. Safe haven currencies like the Swiss franc fell. The CBOE Volatility Index, meanwhile, fell 3% adding to Monday losses as traders took off their hedges.

Volatility in early trading was mostly confined to Tuesday stock blowups from Valeant Pharmaceuticals, Hertz and OneMain Financial, which all used Election Day to dump significantly negative earnings and guidance on their investors.

Embattled Valeant slashed its 2016 financial outlook, provided a cagey picture into its 2017 earnings expectations, and recorded a billion dollar writedown related to a recent acquisition. The stock, a top holding of hedge funds Pershing Square and ValueAct Capital, plunged 18% to new multi-year lows below $16 a share. It has fallen nearly 85% year-to-date, battered by an accounting and price gouging scandal that’s spawned numerous criminal and regulatory probes.

The picture was even worse for OneMain and Hertz, which both saw their shares fall more than 30% in early trading. OneMain, a consumer finance company, reported third quarter earnings that shows a significant deterioration in the credit of its customers as charge-off ratios on loans surged. The stock plunged 38% in early trading, putting year-to-date declines at 60%.

Car rental giant Hertz, meanwhile, plunged over 30% after the company significantly missed third quarter earnings estimates. The company reported third quarter earnings of 49-cents, down from the $2.60 it earned a year ago, and well below the $1.58 a share analysts were expecting. Hertz also slashed its full-year earnings guidance, causing investors to fret its $15 billion debt load.

Stock blowups aside, as midday trading began markets were trending higher and signs of investor fear mitigated. The Mexican Peso and the CBOE Volatility Index have been the two most volatile gauges of investors’ election expectations in what’s seen as a binary choice. As of now, a Trump presidency is seen as causing a volatility spike and a tumble in the peso given his anti-free trade views and temperament. So far, markets are siding with Clinton. By 12:30 pm, the Mexican Peso was trading 0.84% higher versus the dollar, while the VIX was down 4.65%.

Expect trading volatility to increase later in the afternoon or overnight as election data comes in.

Investment strategists at RBC Capital Markets have laid out a baseline for a Clinton and a Trump victory, arguing that the S&P 500 should rally 3%-to–4% upon a Clinton win and decline 10%-to–12% on a Trump victory. At current levels, RBC feels the VIX should decline to 13–14 upon a Clinton victory and rise to 20–25 if Trump prevails, while emerging markets such as Mexico and China should rally under a Clinton presidency and sell off sharply if Trump wins.

[Forbes]