America Is Risking Trump

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Well, the debate night is here. We’ve tried to ignore it long enough, but as the first US presidential debate is starting today, and the markets are going to have to face it very soon. And Donald Trump winning the United States presidential election is a real risk here.

Global markets currently have their head in the sand. There’s no other way to put it. It’s here, it’s real, and if it happens then things are going to get one hell of a mighty shake-up.

Wake up. Donald Trump, President of the United States of America could actually happen. Do those odds look familiar? Brexit type familiar?

There is a good piece on Bloomberg this morning, with this cracker of a quote from Credit Suisse:

“Despite the impending Nov. 8 election, equity [volatilities]are not pricing in much of an election risk premium, with S&P weekly options expiring Nov. 11 trading at just 0.9 vol point premium to Nov. 4 expiry — that’s less than what was priced in for the Fed meeting last week.”

Am I the only one to find that a little puzzling?

We spend our time on this blog focusing on where the biggest risk of a re-pricing will occur if market expectations are not met. Well the fact that markets stoll flat out refuse to believe that Trump will even come close to the White House is certainly an expectation with a real possibility of not being met.

Possibly bigger than any risk we’ve experienced for quite some time.

S&P 500 weekly

S&P 500 weekly

USD/JPY weekly

USD/JPY weekly

We’ll leave these two weekly charts here to refer back to if the proverbial does in fact hit the fan.

This Tuesday

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This is a guest post originally appeared on Vantage FX. Reposted with permission.

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