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Brokerages Brace for Election-Day Volatility

November 8, 2016

As American voters go to the polls to choose the next U.S. president, wealth management firms are preparing for extreme volatility and concerned calls from their clients, Reuters reports.

Democratic presidential hopeful Hillary Clinton is ahead in the polls against her Republican opponent Donald Trump, according to Reuters. But based on S&P 500 index options, the U.S. stock market is expected to swing by about 2% tomorrow regardless of the outcome, the newswire reports. And a Trump win could lead to a 3% to 5% drop in the S&P 500, according to Citigroup estimates cited by Reuters.

Banks are adding extra staff to meet an expected spike in trading while wealth management units are telling advisors to be ready to talk with concerned clients. On Monday Morgan Stanley sent out a memo to its wealth management unit, telling brokers to get ready to talk elections with their clients and recommending research materials for the job, the newswire reports. Wednesday, post-election, the company will also host a call with its Chief Investment Officer, Mike Wilson, for its advisors as well as clients, Fortune writes.

Likewise, Goldman Sachs’ Chief Investment Officer Sharmin Mossavar-Rahmani will hold a call with the company’s private wealth clients, according to an invitation seen by Reuters.

Similar plans are in place at the wealth management units of JPMorgan, Citigroup, Bank of America and Wells Fargo, Fortune writes.

A survey released last week by Charles Schwab found that affluent investors favor a Clinton White House, Financial Advisor magazine writes.


Among 240 people with at least $250,000 in investable assets, Schwab found that 59% see a negative short-term impact from a Trump presidency, while 55% see a negative long-term impact. Only 37% see a negative short-term impact from a Clinton presidency, although 41% see a negative long-term impact, Financial Advisor magazine writes.

But most affluent investors are planning to stay the course when it comes to their portfolios: 77% didn’t plan to make changes prior to the election, and 85% believe their portfolios can handle the coming volatility, according to Schwab’s survey.

Unfortunately, however, market volatility may last long past the election, ThinkAdvisor writes. That’s because Trump isn’t likely to concede if Clinton wins, Andy Friedman of the Washington Update tells ThinkAdvisor.

In any case, the election is just one of many factors that could see market turbulence continue for the rest of the year, CNBC.com writes. There’s continuing market risk due to Britain’s decision earlier this year to leave the European Union, the Fed’s upcoming decision on interest rates and general uncertainty in Europe’s political systems, Karin Kimbrough, head of macro and economic policy at Bank of America Merrill Lynch Global Wealth Management, tells CNBC.

Kimbrough suggests staying focused on the long run, CNBC.com writes.

By Alex Padalka
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  • To read the Reuters article cited in this story, click here.
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