Hillary's 75% Retracement

CoverRisk's model of aggregate tracking polls has Hillary experiencing a 75% Fibonacci retracement event. After climbing dramatically after her convention a retracement was inevitable when considering the polar opposite political divisions in the United States. The polling should trend up for the Democrat from here till the debates at a minimum if not for the remaining election cycle. Models still shows Hillary's probability of winning greater than the Republican candidate.

Stock indexes and their underlying components of stocks have played with large value premiums over the last few years. These premiums are presumed to be from accommodations on a global scale by central banks. For example, CoverRisk calculates the trailing value for the S&P 500 is around 1500 or around 30% lower than the close on September 16th, 2016. A Republican presidential victory in November might begin the decline which would test these trailing values. This type of macro move is always unpredictable since all successful macro predictions are based purely on luck. However, if such a decline were to take place one could image the demagoguery blame from which would spew into an even greater unfriendly and declining investment environment. The I, me, mine make up of the traditional Republican base could see a devastating blow to their financial conditions should all the index premiums disappear.

Markets as September Begins

Equity markets remained quiet in August with the Fed engineered intervention butterfly spread of long equities, short volatility, and short fixed income continuing to work. Despite the bearish calls on equities from Bank of America, Goldman Sachs, and Merrill stock indices keeping making all time highs.

National election data has had little impact though the bid under the market continues to point to the belief that Hillary will win. But in trading and politics one should never forget the "now I've seen everything" events which appear from time to time. A loony vote could put U.S. international companies and their shares in the dinger as attempts to implement trade and immigration promises are endeavored.

CoverRisk's Q8 shows GOOG and MSFT as the most overvalued.