Elections and the Fed Weigh on US Markets

US stocks fell overnight, the first trading day of November, on election jitters as well as today’s Federal Open Market Committee (FOMC) meeting. Both sent jitters throughout the financial markets.

Investors shrugged off a good round of corporate earnings to focus on the noise of the US Presidential election. If Trump wins we could see a bit of a Brexit moment and a period of extreme volatility.

The Dow Jones briefly fell 200 points and below the key 18,000 level. Apple led the losers. The Blue chip index closed about 100 points lower on the day. The S&P 500 was down 0.7 percent and the Nasdaq Composite lost one percent, at one point, before closing down 0.7 percent.

Traders are not trading on fundamentals but on skittish feelings. The selling does not make a lot of sense. Investors simply have itchy trigger fingers.

Elections Cause a Rise in the Volatility Index

The CBOE Volatility Index, or the “fear index” spike higher and you saw the S&P 500 fall below 2,126. Support is now at 2,100 on the global benchmark. The CBOE rose to near 20 and was up more than 10 percent yesterday. This index has risen 6 days in a row, something not seen since the Brexit vote.

Investors are also keeping an eye on today’s FOMC meeting. The Federal Reserve will likely stand pat on monetary policy and interest rates this month. Economists are expecting the Fed to raise interest rates 25 basis points in December. After a December, rate hike, if it happens, the Fed will likely adopt a wait on see approach over the next six months. Should the Fed make no moves in December, the support the US Dollar has seen over the last several weeks will erode.