Retail traders buying the dollar in anticipation of Clinton win, but are more discerning on stocks

<p>Financial markets are starting to price in a victory for Hillary Clinton on Tuesday, after the FBI cleared her of any criminality regarding her email […]</p>

Financial markets are starting to price in a victory for Hillary Clinton on Tuesday, after the FBI cleared her of any criminality regarding her email server issue. This can also be seen in the retail section of the market, City Index clients are net buyers of the Mexican peso, which has been a lightning rod during this election season: falling when Trump climbs in the polls and rallying strongly when his campaign falls off the rails. Our clients are nearly 90% short of USDMXN, which is one of the clearest signs that the retail sector is starting to price in a win for Hillary Clinton on Tuesday.

Dollar rally clinging onto Clinton’s coat tails

Clinton’s expected triumph now that she has been cleared by the FBI is also boosting the US dollar, City Index clients have bought the dollar versus the Japanese yen on Monday, and are also long the USD versus the euro. Interestingly, our clients that are trading cable, 70% of them are still long the pound. This could be a sign of a larger readjustment in the pound after the Court Ruling last Thursday that may delay when the government can trigger Article 50.

Retail traders not buying into stock market rally

Although global stock markets are soaring on Monday after steep sell offs last week, the enthusiasm for a stock market rally may be limited. Our clients are not whole-heartedly diving into this stock market rally on Monday. The FTSE 100 is still 54% sold, while the S&P 500 is 65% sold. This suggests that our clients may be in ‘sell the rally’ mode when it comes to the key global stock markets. Looking ahead, will retail clients buy global stocks on the back of a win for Clinton on Tuesday, or are they starting to cool on equities ahead of the expected rate hike from the Fed next month?

President Clinton could be bad news for stocks

Overall, we will be watching what our clients do closely over the next few days. While the FX market appears to be solely focused on the US election outcome, the way the retail market is trading stocks is more interesting. Our clients may be cautious on stocks for the long-term if the Fed signals that it will embark on a rate hiking cycle, which is more likely under a Clinton Presidency, then we could see any stock market rally cut short in the coming days.

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