When there's trouble in Washington DC, there's trouble on Wall Street

This is an old saying, which can best describe the current situation for the stock market! As I have laid out in the last blog, Trump’s win will likely bring down the market to a large scale. But now I must say, I’m probably too conservative. I think even a HC win will also cause a great deal of volatility and selloff after Nov 8. Why so? Three major factors that make me think so. Regardless which side you are standing on, one thing I think we must agree upon: both candidates are extremely hated by the other half. That really creates a big problem if they are so much hated by half of the population that he/she wants to lead. Trump will be a shock anyway to the market for a lot of uncertainties but HC, used to be viewed as having a lot more certainty, will soon be felt by the Street as also with a lot of uncertainty. Then comes to the second point about the legality of her victory, if she indeed wins. We have seen more and more evidence almost on a daily basis pointing towards the dirty behaviors and conduct of HC’s campaign activities, including her initial treatment to her party competitor, Sanders. I’m sure Trump’s legal team is busy collecting such solid evidence and may likely challenge the legality of HC’s victory. Regardless the final result of this legal battle, it will for sure take a couple of months at minimum. Each passing day of unsettling election will be a great threat to the stock market stability. Talking about the certainty that the Street loves! The third point may be more problematic for HC if she wins. We are seeing the political saga unfolding in an unprecedented fashion at moment and there is increasing evidence to make people wondering whether or not HC and even her family have been involved in illegal or criminal activities.  Now think about the scenario that HC wins but she is soon indicted that will almost for sure lead to impeachment. Will that make the Street happy to drive the stock prices higher? I bet not!  More I think about this, more I cannot justify for a happy ending from this election for the near term!

 

Well, all of these concerns are just my personal concerns and I could be very wrong that HC may end up with a clean land-sliding win and becomes the next US president without any legal challenges. But my money won’t bet on this and I’m aggressively buying VIX these days to be prepared for the unthinkable! VXX is the most direct way to track VIX. In the past few days, VIX jumped 50% higher and my UVXY options doubled already. If a true panic hits, I'm looking for several times gain in the weeks ahead.  Of course, using options or inverse ETFs is another effective way to protect. When you read this, we have just two trading days left before the historical election. If you bet for a skyrocketing market in the months ahead, I can only say Good Luck!