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Monthly Share Market Commentary: Run up to the US Presidential Elections

October 2016

October 3, 2016 | 13:15 | Dubai

Last month, we outlined 3 events as having an influential effect on global markets. The central banks including the Fed largely maintained a status quo; the much awaited meeting in Algeria around oil ended with an agreement to cut output to between 32.5 million barrels per day (bpd) and 33.0 million bpd from about 33.5 million bpd, with details to be finalized at OPEC’s policy meeting in November. The final leg of the US Presidential Elections saw the 1st debate between Republican Donald Trump and Democrat Hillary Clinton take place – markets globally are expected to see swings in the current month as they take cues from this major decider scheduled beginning November.

As seen from the chart, markets moves were volatile with a largely downwards trend – as uncertainty mounts amidst the global political scenario around the US elections, there is some bit of profit booking making its way to the stock markets.

The CBOE VIX, a measure of stock market volatility, rose more than 8% last week. The VIX currently trades at 13.76, which is estimated at about 35% lower than its historical average. However, the index has shown signs of mean-reversion with the recent run up, reaching its highest level since the Brexit crisis.

chart-03102016

The Tadawul All Shares Index continued with a 7.5% correction for the month – this has taken the overall fall in the index to 19% for the year, making it the worst performing market. The stock market has plunged to its lowest close since March 2011 on fears of the government considering more austerity measures to curb a big budget deficit caused by low oil prices. The other markets deeply in the red for the year include Japan’s Nikkei 225 and China’s Shanghai Composite.

The FTSE 100 recorded a gain of 1.73% for the month making the total yearly gain 11%. Regionally, the EGX 30 and DFM General remain the best performing markets with gains of 12% and 10% respectively.

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