Saturday, October 8, 2016

Do not buy shares until US Presidential Election and Fed rate hike are both over

Both events are “known unknown” events.

That means you know that the event will happen, but you do not know the outcome.

In term of US Presidential election 2016, you know that it will take place in early November, and you know that one of the two candidates, Hillary Clinton and Donald Trump, will be the President.

However, you do not know who.

As for the Fed rate hike, you know that the interest rate hike is coming, but you do not know when or by how much.

There is a high possibility that the rate hike will occur in December and the interest rate will increase by 0.25%.

The “unknown” part of both events has a great impact on the volatility of the stock markets worldwide.

 When Hillary Clinton appears more likely than Donald Trump to become the next President, the stock markets in many parts of the world cheer.

When certain polls or rumors mention that Donald Trump is more likely to become the next President, the stock markets end in red.

The reason is that Hillary Clinton is a “known” factor.  That means the world knows her as a politician, and knows that she will not change the policies drastically.

Donald Trump is an unknown factor.

It is best to wait till both events are over, and the outcome known, and the investors have digested the information to make buy and sell decisions.

By then, the third quarter results of the listed companies are out, and you can use the decision to buy shares for income investments.

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