U.S. midterm elections keeping asian traders on their toes
Asian markets are a little wobbly today. This isn’t any surprise because traders are sitting on the side-line ahead the mid-term election results. We do think that the chances are very minute that Democrats would win both the Senate and House. Winning the Senate and House would only trigger a meaningful risk off event.
Any other outcome may not be able to push the markets lower. Yes, if the Democrats wins the House and Senate goes to the Republicans, we could see some knee jerk reaction in the equity markets, but we do not think that would be a game changer. The focus would turn to major issues such as the trade war, the economic health of the U.S. economy and how many more interest rate hikes we are going to see from the Fed. As long as the Fed doesn’t have anything to worry about, we think they would continue to push the interest rates higher.
So far now, we are waiting for the mid-term elections very closely and we would be monitoring the market action. A lot of traders have already installed a safety net in their portfolio but the outcome of the event may still bring a surprise.
Looking at the gold price, it becomes clear that most traders are comfortable with their views and agree with the general consensus that the event doesn’t carry much risk. The only reason that we are seeing some pull back in the gold price because the mid-term elections have not been able to bring the kind of volatility that many were expecting. This means that the Fed would continue on their interest rate hike path which would be dollar positive and negative for the precious metal.
There is a strong correlation with the dollar index and the Trump’s approval rating. This shows that as long as President Trump is able to push his polices across the line, it is more likely that the price of the dollar would continue to rise.