This Election Marks the Beginning of Volatility

Tyler Durden's picture

Submitted by Jared Dillian via Mauldin Economics

Volatility is high going into this election (because nobody knows what will happen, and there is a lot at stake). People think that after the election, the uncertainty will be out of the way, and volatility will subside.

Will it?

Here are the ways this election could go wrong

Let’s think about this a little bit.

There are a bunch of ways that this election can go wrong:

  • Gary Johnson wins New Mexico, neither Clinton nor Trump can get to 270 electoral votes, and the election is thrust into the House of Representatives
  • Evan McMullin wins Utah, neither Clinton nor Trump can get to 270 electoral votes, and the election is thrust into the House of Representatives
  • Clinton wins, and Trump refuses to concede
  • Trump wins, and Clinton refuses to concede
  • States like North Carolina and Florida are a tossup, and the outcome of the election isn’t known for weeks
  • Reports of election fraud (on either side)
  • Reports of foreign interference in the election

And that doesn’t include the things we haven’t thought of (including the dreaded electoral college/popular vote split), and can’t think of, because they’re true black swans.

For those of you who were around during the prolonged recount of 2000—do you remember the effect the election had on the equity markets? It was not bullish.

I was in New York at the time, interviewing at Lehman Brothers. I remember that the market was not happy. Lots of red on the screen.

If this were an ordinary election, sure—I’d say by the following morning we would have a winner, and life would go on. But this is no ordinary election.

And of course, none of this includes the scenario I discussed in my article last week, "The Fed Is More Hawkish Than You Think,"… the possibility of a Democratic sweep, which a Goldman Sachs poll recently put at a 2% probability.

I don’t think the election is the end of volatility—I think it is the beginning of volatility. The only way it is the end of volatility is if there is a clear and decisive winner, and the loser concedes immediately.

But what are the chances of that?

If you want to play this through one of the myriad volatility ETFs, be careful. (We will be discussing this more in the not-too-distant future.) Just know that it’s probably a good idea to get out of the pool. Expert swimmers only.

The future of the US political system

I am a crappy political scientist. But I am no dummy.

I started thinking about who the Republican presidential candidate might be in 2020, like perhaps Marco Rubio. Then I started to wonder if the Republican Party would even be around in 2020.

I think there is a very good chance that it splits in two and ceases to exist. On one side, you would have the right-wing populists (represented by Trump), and on the other side you would have the classical liberals (represented by Paul Ryan, who is foolishly supporting Trump).

But the Democratic Party is under pressure as well. The Democrats will likely last another four years, but it’s also possible that they could split someday into a center-left party and a far-left party (the Bernie supporters).

Of course, the US political system doesn’t function well with more than two parties. We do not have a parliamentary system (though some people wish we did).

There is a lot of daylight here for a centrist party. Many voters didn’t participate in the primaries and were pretty appalled at how extreme the rhetoric got, both on the right and the left.

I’m not smart enough to really predict the future, but I wouldn’t be surprised if our two-party system had changed beyond recognition for 2020.

We do change political parties every so often in this country—lots of people have been talking about the Republicans and comparing them to Zachary Taylor and the Whigs. It happens once in a generation. Now might be the time.

Inflation will go up post election

Well, you can be sure that one thing is going to happen no matter who wins the election:

Inflation will be going up.

If Donald Trump wins, we will have 35% tariffs on TVs, which will increase in price accordingly. Protectionism sounds great in theory, not so great in practice. The price of all imported goods will rise sharply—especially electronics, where people have become accustomed to prices going down for years.

But Hillary Clinton is also good for inflation. Regulation increases the cost of everything. This is known as “inflation by fiat.” There are a million examples of it. Those costs of compliance feed into everything we buy. The regulatory state has expanded massively in the last eight years, and it will continue to expand under a Clinton administration.

One thing is for sure—inflation is not going down. The only question is, how fast will it go up?

It is starting to get priced into the TIPS market:



Which is something the Fed watches closely.

You can look at this any way you want. The Fed is either hiking rates preemptively (because of inflation) or belatedly (because of unemployment). But barring any complete collapse in a major economic indicator (like nonfarm payrolls), I fully expect the Fed to hike interest rates in December.

And if this hasn’t been a particularly upbeat piece, you can guess where I stand on the stock market.

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knukles's picture

As your attorney, I'd advise you to start drinking fluoridated water heavily.

Yes We Can. But Lets Not.'s picture

ZHer, for whom did you vote for POTUS:

>>>  TRUMP

>>>  ---->H

If 'other', specify below.

jus_lite_reading's picture

If Hillary steals this election: Patriots unite and shut this whole CUNTry down.

If Trump wins: Jobs come back to America and economy booms!

847328_3527's picture

Just as crooked Hillary failed to comply with the fbi subpoena and never turned over all her emails [and illegally detroyed over 33,000 of those emails instead], Americans may choose not to comply with a fraudulently elected official.


What's good for the Goose, is also good for the Gander.

jus_lite_reading's picture

Either the laws apply to ALL equally or to nobody. It is that simple.

LawsofPhysics's picture


Free John Corzine!!!

Oh wait nevermind...

moral hazard can be a real motherfucker...

Dog Will Hunt's picture

It marks the beginning of the Republican equivalent of Sore/Loserman:

It's rigged!  Trump should've won!

Bu...bu...Trump carried Ohio!  

Bu...bu...Trump carried Idaho!  

Bu...bu...Trump barely carried Texas!  

I'll be here to hand out tissues tonight so you can all wipe your drippy, fussy little pussies. 


Arrowflinger's picture

Whaaaa..    ?

Nothing about GOP Establishment treachery? /s

NumberNone's picture

You voted with your vagina. Good for you and congratulations. .

pickatheweek's picture

Typical bleeding heart libtard post.  Go crawl back under your rock, put your asshat back on, and find another site to troll...may I suggest Marketwatch? You'll certainly feel right at home there dickstein.

Sudden Debt's picture

What's the score on the election as of now?


Yes We Can. But Lets Not.'s picture

Don't know.  First results start to come in in 3 hours

Countrybunkererd's picture

look at the hellion club...ben franklin and pull it forward to pedopodesta.  Same as it ever was.

Scuba Steve's picture

And Wikileaks may provide the slight tear in the protection bubble for these folks .... the Common Man marches on.

AlexCharting's picture

Two Options: Trump or Civil War. 

nancysjet's picture

Someone should tell the demonrats to stop lying to and cheating

the American people or you will get your war and you will lose.

nancysjet's picture

Someone should tell the demonrats to stop lying to and cheating

the American people or you will get your war and you will lose.

bankbob's picture

While you are at it - why don't you tell Marie Antoinet that she is out of cake.

Bear's picture

I feel like I'm in a big Spin Room. Everywhere I look I see only lies ... Lets throw them all out and start over again.

Akzed's picture

Dear Donald,

When you win, please let's get rid of the 0b00ba tax on cigars.





Zest's picture

Haven't we had volatility for quite some time now? It's not the beginning or end of anything - just a continuation to a higher extreme.

Hohum's picture

I knew Zachary Taylor, I was friends with Zachary Taylor, you are no Zachary Taylor--David Rockefeller

Countrybunkererd's picture

pile into twitter...that will surely go up.  And you can crap in one hand and wish in the other... yep drink fluoridated water as knukles said.

Dr.Carl's picture

Interesting article. I think a Trump win would create some short term volatility but would be better for the stock market and the nation as a whole in the long run. 

bankbob's picture

Once artificial interest rates return to reality - stocks and bond pricing will follow.

Yes We Can. But Lets Not.'s picture

If Trump gets in, I'd hope that a priority would be to overhaul election systems, to take tech/programming completely out of the equation, to sharply reduce chances for fraud.  And overhaul voter registration and enforce laws as matter of course rather than selectively as under Obanana.

dcohn's picture

Nice Dream....

Trump aint gonna redo shit.  God Bless him though and while he is a flaming rectum sucker he is miles better than Hitlery.

It just does not work anymore.  System is busted.

VWAndy's picture

 This is like the triangle of fire. To have a fire you need fuel, oxygen and a spark. Add a forth leg aka some stupid and it blows up.

Black Forest's picture

This erection marks the beginning of virginity.

LawsofPhysics's picture

Churn baby churn...

At least until all fiat dies...

Yen Cross's picture

   This is the calm before the storm. We're in the proverbial "eye" of the hurricane.

LawsofPhysics's picture

My thoughts as well.  Look at the ten year.  Rates are going up, the Fed is irrelevant.

dilligaff's picture

"on the other side you would have the classical liberals (represented by Paul Ryan)".  

WTF has this asshat been smoking???

The Gun Is Good's picture

Saw that. Could it be an author typo / brain fart?

Nick Jihad's picture

"If Donald Trump wins, we will have 35% tariffs on TVs,"

Yeah, because the President can just impose a new tariff via executive order. Maybe Hillary could (she can do whatever she wants, apparently), but not Trump.

TruthHunter's picture

Step daughter saw this  on facebook. "due to heavy volume, voting has been extended

through tomorrow. Hillary voters are to vote today and Trump voters tomorrow"

Nephilim's picture


bankbob's picture

Once the artificially low Interest Rates are raised - stocks and bonds will have to return to reality based pricing.

market le pew's picture

I agree, and that's why it won't happen

market le pew's picture

I bet you that a Clinton win will be the absolute death of volatility, until we get a systemic collapse. Anyone stupid enough trading for a living might as well hand over their cash to a big bank or HFT firm.

MadHatt's picture

This doesnt mark anything.

It started in 1913 after the federal reserve was put in place.

This is just part of the show.

Inthemix96's picture

We have been Usurped folks,

Nothing else, including the shit from thin air matters, not a fucking jot.  Cancel the fraudulent debt, nullify anything in the way of the greatest robbery against humanity that has ever needed industrial quantities of nooses for.

And make sure every single one of the fucking cunts that draw down on your collective toil, hang, and I fucking mean HANG for the filthy shitty, think they were going to get away with it, fucking enslavement of us lot, for them, at our fucking expense.

You want volatility?  Well I do believe, before this year sets through, you know fucking Dog damn well you will.

Tell Tony B.Liar he is on borrowed time if you could chaps, my mate is going to gut the cunt.

What what, eh?


gezley's picture

Best regards to your mate itm96!


Inthemix96's picture

Petion of Redress of the outrageous manifestation of usurpation of our collective general co-habitaion as we know it gezely,


Has been royally fucked over mate, as ever mind


vvadi's picture

Tomorrow our great leader(BO) will announce thru the ministry of propaganda channels

ABC (Always Broadcast Clinton)

CBS (Clinton Broadcast Services)

CNN (Clinton News Network)

NBC (National Broadcast Clinton)

FOX (Fixated  on X)

MSNBC (M Stauncher NBC)

that Hillary Clinton (Our Pay to Play champion) has won every state in the election vs Chapter 11 champ.

There were slight hiccups that were auto corrected by Thought Media (Google, FB, Twitter and Snap Chat). There is no email(s) linking Clinton, as all rogue outlets  WiKi leaks, Reddit and zero hedge were auto bleached and all those deplorables (Assange, Snowden and Manning ) were droned. Clinton wants to use this mandate to nuke a rogue nation that is stealing her associate’s dump and planting them on Weiner’s .

Millions of Americans ( has bought Billion likes from FB) will cheer the first female president of USA.


PoasterToaster's picture
PoasterToaster (not verified) Nov 8, 2016 4:39 PM

The election ends and things seems to mellow emotionally compared to the media-driven fever we've all been treated to. But then something real actually happens for the first time in our lives. That would be unsettling. The rest is just rampant emotionalism being manipulated.

Flying Wombat's picture

“Brexit 2.0” Trump Surprise Will Be Caused By Lousy Data Like “VoteCastr” Data Run Without Context – Eric Dubin