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Market Pricing

October 16, 2016 by Jeff Carlson, CFA

I woke up this morning to the “stunning” news that Trump was only 4 points behind Hillary according to a new Washington Post-ABC News poll. As an aside the WSJ’s web page headline reads Trump trails Hillary by 11 using a different – and possibly earlier poll – go figure. Either way, I didn’t find the news all that stunning.

Allow me to explain. For the entire campaign, the media has been reporting on Trump. Digging up whatever they could. And then came the news of Trump’s comments and the entire firestorm that ensued. In my personal opinion the media ended up far more frothy and lathered about this issue than did the general public – but that’s not the direct point I will be making – although it is connected. At any rate, the MSM has been pretty quiet on all the news that’s been flowing out on Hillary. As a matter of fact, if you weren’t actually looking for news on Hillary or had been watching “regular” news channels like CNN, NBC, CBS you might be only vaguely aware of the email leaks by Wikileaks and certainly you would not have been fully apprised of the contents – and how truly damning they are.

Which leads me to my real point. Assume for a moment that the two candidates are stocks – which in a very real sense they are. Trump is a stock that has been covered non-stop – and it’s all bad. All the information out there seems to be pretty much priced in. I’m not saying there can’t be some blockbuster scandal forthcoming – there may well be – but I am saying that Trump’s stock already has a lot of bad news “priced” in. All the analysts out there have a “sell” recommendation on Trump.

Now turn to Hillary’s stock. The vast majority of the “analyst” reports (news media) have been glowing. Hillary is a “buy” – now more than ever. Her stock seems to have every bit of good news priced into it – and only some of the bad.

And there has been – and continues to be – so much bad. One noteworthy item this morning that’s just beginning to get real attention is a release that senior State Department official Patrick Kennedy discussed a quid pro quo arrangement with the FBI in which the FBI would re-classify a Clinton email in exchange for FBI posts overseas. Thankfully, it appears the FBI managed to retain a shred of integrity and rejected the deal.

Just. Absolutely. Speechless.

So back to my point. Hillary has all the upside priced into her stock but very little of the bad news. Trump has nothing but bad news priced into his stock. In stock-speak this would strongly indicate that Hillary’s stock is overvalued (Sell) and Trump’s is undervalued (Buy).

In this election there is still a lot more to come and we have the debate on Wednesday. But if I was picking stocks I would strongly look at selling Hillary’s and buying Trump’s.

I am not trying to make predictions but I am trying to make a point. I don’t think voters will be that much further shocked by any revelations on The Donald. But they might be with Hillary.

 

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Filed Under: All Posts, Economic, Hillary Clinton, President Trump

Jeff Carlson is a CFA® charterholder.

He worked for 20 years as an analyst and portfolio manager in the High Yield Bond Market. He holds degrees in finance and economics.

He can be found on X (Twitter) at @themarketswork or on Substack at Truth Over News

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