Even with her exoneration by the FBI at the weekend, a victory for Hillary Clinton is not yet guaranteed. Just a few hours before an expected 130m Americans head to the polls, it is still unclear which candidate will enter the Oval Office next year.
She may have the edge – Nate Silver’s FiveThirtyEight had Clinton’s chances of winning at 66 per cent at the time of writing, but her effectiveness in turning out the black and Hispanic voters she needs has yet to be tested.
A victory for either candidate is expected to move the market. For anyone looking to trade contracts for difference (CFDs) as the results come in tonight, there are a few things to bear in mind.
First, where does the risk lie? According to James Butterfill, head of research and investment at ETF Securities, the most significant market changes around the last 22 US presidential elections have come about when the presidential party has changed.
In 2016’s case, a market movement might be more pronounced, given that Trump’s policies contrast starkly with the policy platforms of his Republican forebears. Within a quarter, he says, equity markets could fall 6 per cent, and gold prices could surge by up to 10 per cent in a year.
Markets are likely to move in any event. But the extent of a post-vote Clinton rally depends on how much the dollar and the S&P 500 rise before tonight.
With Clinton cleared by the FBI at the weekend, markets embraced her strengthened position in yesterday’s trading. JP Morgan has said that the large cap index should move back towards 2,150 if she does win (up 3 per cent on Friday’s close), with European and emerging market equities gaining 3 to 4 per cent.
The risk event is a Trump victory. “If you’re buying, you should be aware that the market could quickly drop 3 to 5 per cent,” says Adam Jepsen of Financial Spreads. “If you’re shorting, you should be prepared that there could be a soft relief rally if Clinton wins,” he says.
Volatility is also a threat. The Vix index, also known as Wall Street’s gauge of fear, rose substantially last week. “You can always be on the right side of the trade but on the wrong side of volatility,” adds Jepsen.
Each state has an allotted number of electors, based on its population, who should vote for the candidate that their state has backed. Some states matter more than others.
California has 55 electors, but Montana and others have just three. Aside from Dixville Notch, a village in New Hampshire which has a tradition of voting in the middle of the night the day before voting day, all 50 states and Washington DC close their polls between 6pm and 12am EST (or 11pm to 5am GMT).
As with UK elections, exit polls will give a result for each state soon after polls close, offering traders a first, if potentially unreliable, projection for the actual results. Where the result is too close to call, TV networks may refuse to provide a projection, and the states which declare first are likely to be especially safe ones for either party.
Florida is among the states which close polls earliest (midnight GMT), and the most hotly contested, but it took days before a definitive declaration was made there in the last election. The earliest that a candidate could reasonably cross the line, with 270 electoral college votes required, is thought to be around 11pm EST (4am GMT). John McCain and Mitt Romney both conceded a short while after midnight EST.
While Clinton has lost some ground in national polls in recent weeks, and her lead in Florida and other swing states has shrunk, six states in particular will determine her chances. Known as her “firewall”, they include Colorado, Michigan, New Hampshire, Pennsylvania, Virginia and Wisconsin.
Of these, New Hampshire is small, so may be among the first to announce its result. A number of polls last week showed either a tie in New Hampshire, or a Trump lead. With a large proportion of white working class voters, a Trump win here and a high turnout could signal that a Hillary Clinton victory is less than sure elsewhere too.
Equally, if Clinton wins in North Carolina and Ohio, she could be well on the way to victory. If she does poorly here, it could be a sign that she hasn’t turned out a sufficient number of black voters across the country. If Trump doesn’t take Ohio and Florida, a Republican President will look unlikely.