Trump’s Impact On The Market May Be Both Short And Long Term

How Stocks, Bonds, and Currency Reacted to BREXIT Vote

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The blue line represents UK stocks, the gold line is the pound, and the black line, bond yields

The Bank of England (BOE) reacted predictably and tried to save the stock market with more liquidity. It didn't officially lower rates (to 0.25%, with a promise of zero percent) and increase quantitative easing until August 4th, although the move was well telegraphed to the markets. Bonds rallied earlier and the pound sold off further later. By October, bonds were heading back down with yields going higher because inflation was already beginning to accelerate because of the BOE's move. So, the impact of the BREXIT vote is still taking place, and there's more to come.

U.S. investors should take heed to the market consequences of the BREXIT vote and what it could mean for them. There are many similarities to the 2016 presidential election in the United States. Establishment interests are all lined up on Hillary Clinton's side. So much so, that a number of Republican leaders don't endorse or have rescinded their endorsement of Donald Trump. The mainstream media almost universally supports her as well, just as it was one voice on BREXIT in the UK. Yet, it's Donald Trump that draws massive crowds indicating widespread popular support (Hillary does not).

As a former pollster, I can state many of the polls showing Hillary Clinton ahead have over sampled groups favorable to her and are thus unreliable. It took me only two minutes looking at the list of 2016 presidential election polls published by RealClear Politics to find three blatant examples of this. The Republic/Morrison/Cronkite poll taken in Arizona and finished on October 15th showed Clinton five points ahead. Democrats made up 44% of the sample even though only 30% of registered voters in Arizona are Democrats (so, it was more likely Clinton was several points behind).

Two other polls substantially over sampled college graduates (a group that is very favorable to Clinton). These were the Christopher Newport University poll of Virginia voters finished on October 19th, which had Clinton 12 points ahead and the New York Times Upshot -- Sienna poll of North Carolina voters finished on October 23rd, which had Clinton 7 points ahead. In the Virginia poll, 60% of the respondents were college graduates, whereas the number for the Virginia populace is 35%. In the North Carolina poll the sample was 46% college graduates instead of 27%.

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