Hillary Clinton’s health issues gave another stress to ponder for investors who have been nursing wounds after the worst in three months for equity and debt markets.
Traders who fear ruptures to U.S. policy have been soothed and see virtue in political gridlock by the 68-year-old Democratic presidential nominee polling edge over Donald Trump. Clinton was forced to leave abruptly a function held for a Sept. 11 commemoration Sunday. Her doctors said she had became overheated and dehydrated and is suffering from pneumonia. Clinton was advised to modify her schedule so she can rest and prescribed antibiotics.
With the S&P 500 Index getting jarred Friday out of its tightest trading range ever in a selloff that erased about $500 billion of share value, volatility is already resurfacing in markets that had purred along for two months inured to everything from politics to weakening global growth. Investors and analysts said expectations she will prevail in November have been a factor in the calm and predicted the scrutiny will intensify even while they were reluctant to speculate on Clinton’s health.
“If we found out that there was something catastrophic about her health it obviously would matter, but you have to be very careful about extrapolating shorter-term news. What we do know is we have two candidates around 70 years old and in reality it must be brutal running around the world for two years,” Jonathan Golub, managing director and chief US market strategist at RBC Capital Markets LLC in New York, said.
The blanket of tranquility that has enveloped global markets was torn apart after speculations on Friday that the central banks are losing their taste for extra stimulus. In the biggest drop since Britain voted to secede from the European Union, the S&P 500, global equities and emerging-market assets tumbled at least 2 percent. While the dollar almost erased a weekly slide, the yield on the 10-year Treasury note jumped to the highest since June.
In August, the CBOE Volatility Index, the options-derived gauge of price turbulence, recorded one of its lowest monthly averages since the bull market began in March 2009 and the extent to which investors have been able to ignore politics is illustrated by this statistics. Hitting its lowest level of the year last week is a measure of cross-market volatility encompassing equities, rates, currencies and commodities overseen by Bank of America.
“We’re fragile right now. It’s already priced into the market that Hillary Clinton is going to be president so right now anything that changes that narrative is going to give the market a pause to consider what that would mean,” said Kevin Kelly, chief investment officer at Recon Capital Partners LLC in Greenwich, Connecticut, which oversees $350 million.
S&P 500 futures expiring in December dropped 0.6 percent at 10:05 a.m. in London.
Health questions for Clinton are sure to resurface after her sudden departure from the ceremony in New York. She was filmed by a bystander that showed that helped by aids and Secret Service agents, she was helped into a black van after appearing to stumble. While Republicans have sought to raise questions about her fitness for office, particularly following a concussion in 2012 that resulted in a blood clot, she blamed recent coughing jags on allergies.
“If Clinton’s health becomes a larger factor with regard to voter decision-making, the market may have to recalculate the risk-reward of a regime change in the White House, as Clinton right now is assumed as a continuity from the current administration. Obviously today is another thing that’s going to draw closer attention,” Yousef Abbasi, global market strategist at JonesTrading Institutional Services LLC, said.
(Adapted from Bloomberg)