Traditional media, blogs and social networks were lit up last night for the highly anticipated first Trump-Clinton presidential debate moderated by Lester Holt. The only thing certain is that nothing is certain. Depending on the particular axe a media outlet, writer, commenter or pundit has to grind, the perspective on who won is different. This is not high school debate club. No points are given so winners and losers are entirely a matter of opinion.
We are not going to offer our own capsule review and call a winner. To us that is not what is relevant to our decisionmaking process. What is relevant is how the markets reacted during and after the debate. We will not succumb to short-termism and try to game a quick surge in Mexico when Donald Trump takes a shot or play a rally in large US corporates that would benefit from a more conciliatory tax regime when Hillary Clinton gets hit on taxation. But, we do see signal in the noise. Maybe more so than in any election since Carter-Reagan, the differences are stark, and nation-states and markets are reacting to the prospects of each candidate assuming office.
A split electorate means this is anybody’s election. The market, showing some of that disturbing behavior that looks more like Vegas odds-making than price discovery, is trying to handicap an outcome and the implications. Our call for the next half a quarter is for heightened volatility as each candidate’s fortune rises and falls, followed by substantial directional moves when the results become known. WCM is focused on longer-term value and will take advantage of market disruptions from this volatility that create a gap between short-term price and that long-term value.