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Portfolio > ETFs > Broad Market

How Wall Street Scored Trump-Clinton Debate

By Luke Kawa, Sid Verma & Julie Verhage

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A poll performed by CNN in the immediate aftermath of the first presidential debate between Democratic nominee Hillary Clinton and Republican nominee Donald Trump indicates that the former Secretary of State trounced the real estate mogul in the head-to-head matchup.

On a day when market strategists have become fully-fledged political pundits, Wall Street largely agrees with popular opinion.

Analysts cited price action in U.S. stock futures and the Mexican peso, which strengthened during the first few exchanges of the contest, as proof that financial markets believed Hillary Clinton prevailed in the debate:

However, strategists also cautioned that the exchange of hostilities at Hofstra University may not have done much to influence the race, raising the stakes for the upcoming debate on Oct 9.

Here’s what Wall Street had to say about round one of Clinton vs. Trump.

Harvinder Sian, global head of G10 rates strategy at Citigroup Inc.:

“The first U.S. Presidential debate has seen no knock-out performance from either candidate but with MXN FX gaining the initial market reaction has been to favor Clinton over Trump, at the margins. The debate itself broke little new ground and is unlikely to be seen as a turning point in the election no matter the final outcome.”

Kit Juckes, global strategist at Societe Generale SA:

“The press verdict on the first U.S. Presidential debate is that Hillary Clinton ‘won’, but Donald Trump didn’t lose badly enough to really reduce the uncertainty. The market verdict is that the Mexican peso, the South African rand and the Korean won all won, while the Japanese yen was the loser. In other words, Mexico heaved a sigh of relief (for now, at any rate) while the markets have gone back to what they know best – hunting for yield.”

Peter Boockvar, chief market analyst at The Lindsey Group LLC:

“Bloomberg news is calling the move up in the S&P futures as the ‘Clinton Rally.’ The obvious reference to the belief that a Clinton win would be better for markets than a box of chocolates Forrest Gump Trump win where you never know what you’re going to get. The Mexican peso is higher too. 

“Putting aside their personalities and policy proposals, it will likely not matter who the next President is when it comes to where markets go. As we are in the 2nd longest bull market of all time and as we approach the 8th year of this economic expansion (however punk), odds are high that whoever the next President is they will preside over a recession, a bear market and rising debts and deficits.”

George Pearkes, macro strategist at Bespoke Investment Group:

“We believe it’s uncontroversial to observe that the debate went in Clinton’s favor last night; that was the broad consensus from pundits, focus groups, the betting markets, and financial markets…we note the Iowa Electronic Markets betting average now has Clinton with an approximately 70 percent win probability. That’s up 3 points from the midnight “close” price on Sunday night and 5 points off the intraday low.”

Sales and Trading Desk at UBS AG:

“Clinton avoided any significant damage, and Donald Trump was unexpectedly forced on the defensive. Yet neither candidate can be declared the obvious winner – and supporters of both will be happy.

“Trump played to his anti-establishment base, painting Clinton as the ultimate Washington ‘career politician’, constantly highlighting her long political career. For Clinton, she highlighted some of Trump’s more controversial comments, made clear pitches to minority and women voters, as well as those undecided voters who were looking for more policy substance and details.”

The next debate is scheduled for Oct. 9: With no obvious winner tonight, it will likely take on far greater importance.

Marc Ostwald, strategist at ADM Investor Services International Ltd.:

“While there is a reasonably busy schedule of statistics today, there is little doubt that it will be the post-Trump/Clinton ‘debate’ polls, which will quite possibly attract most attention, as Q4′s primary ‘risk event’ looms in the headlights.

“The Mexican Peso has been the market’s whipping boy for fears about a Trump presidency, and as such the spike higher overnight post-debate would suggest that Clinton emerged in the markets’ eyes, though as opinion polls emerge over the next few days, this may change, even if the sobering lesson from the Brexit polls and accompanying market price action serve as a sharp reminder of the need for caution.”

Richard McGuire, head of rates strategy at Rabobank

“The debate saw Dow Futures add 100 points whilst currencies from the Mexican peso to the Japanese Yen whipsaw to end the session higher, particularly in the case of the peso which rose 1.7 percent as currency markets concluded that the Democratic candidate was most likely to take over the oval office and thus leave the relationship between the U.S. and its neighbor unchanged.”

Economics & FI/FX research at UniCredit SpA

“During the first presidential debate, Mrs. Clinton looked more presidential than Mr. Trump, as expected. Snap polls support the view that that Mrs. Clinton clearly won the debate, although by a modest margin.

“While we have to wait until the weekend to see the impact of the U.S. presidential TV debate on the polls, early reports that Hillary Clinton emerged as the winner ‎is likely to have limited influence on market volatility at least until the second debate scheduled for 9 October.

“Thus, as has been the case over the last few weeks, U.S. election polls are likely to have only a limited influence on global bond markets over the next couple of days.”

Cathal Kennedy, European economist at RBC Capital Markets:

“A snap poll of 1,000 debate watchers from Public Policy Polling after the first of the three U.S. presidential debates last night found 51 percent thought Mrs Clinton had won, 40 percent thought Mr Trump came out on top and 9 percent were unsure.

“Financial markets are also judging it in favor of Clinton as U.S. stock index futures reversed losses (Dow futures briefly added 100 points during the debate) after the debate was over, Mexico’s peso rebounded from a record low and haven assets including the yen and gold fell.”

Benjamin Salisbury, analyst at FBR Capital Markets & Co.

Mr. Trump questioned the independence of the Federal Reserve in last night’s debate, but did seem to support a “low for longer” interest rate environment. We have argued that a Clinton presidency would allow more consistency among the Fed’s leadership, allowing it to continue accommodative monetary policy—and viewed as more positive by the market…The debate was almost as notable for what was not covered as for what was covered: Healthcare, immigration, veterans, labor, and homeland security were not mentioned in any meaningful way.

Neil Dutta, head of U.S. economics at Renaissance Macro Research:

“The easiest way for HRC to respond to Trump’s attacks on NAFTA is to state that NAFTA came into force in 1994 and over the next six years the U.S. economy enjoyed one of strongest sustained periods of economic growth in the post-WWII era.

“So, how bad could it have been? She does not have to defend NAFTA per se but simply go over a timeline of events. I get that NAFTA has become something of a buzzword against trade, but this seems like a pretty easy sell considering most voters associate the Clinton presidency with the strong economy of the 90s.”

James Rossiter, senior global strategist at TD Securities:

“After a few wobbles, markets decided that Secretary Clinton on balance won the debate, so USD softened and risk was bid as a more constructive tone took hold.”

Derek Holt, vice president of economics at Scotiabank

“Polls over coming days will matter more and can swing the other way (eg. Gore won the early post-debate polls over Bush, but lost the later ones). Personally I thought she won the debate hands down and exhibited a mastery of the substantive issues that eluded Trump’s angry persona.”

Rates strategy team at Societe Generale SA

“But there are some developing stories which for now are offering support to bonds and have the potential to turn into blowouts. One is the U.S. election campaign, though political commentators suggest Clinton may have won the first debate last night.

“A CNN/ORC poll showed 62 percent of viewers believed she won. Financial markets seem to agree: the likes of MXN and CAD have gained overnight.”

Daniel Hui, executive director of global FX strategy at JPMorgan Chase & Co.:

“While in the next 24 hours, there will be much analysis and punditry judging the relative performance of the two candidates in tonight’s first Presidential debate, the proof of the pudding will be how this debate might shift the momentum in the polling, as they start coming out later this week.

“In the meantime, we note that the first of three sections of the debate which discussed economic policy fell largely to script. Of the issues we have earlier identified as being the most FX relevant, Trump led his comments on economic policy with an attack on trade, specifically on Mexico and NAFTA first and foremost, as well as on China.

“Secondary in emphasis was his tax plan to cut the corporate tax rate to 15 percent in order to incentivize companies to invest in the U.S. rather than abroad.”

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