Markets are weird creatures, if you have not figured that out already. A market is made up of many individuals with vastly different personal interests and opinions.

But collectively, the market does have something to say about global culture, economics and politics. And right now, as we head into next week’s U.S. presidential election, markets are virtually frozen. 

As a general rule, markets like continuity. And clearly Hillary Clinton represents continuity more than Donald Trump does. 

Last month, when polls were leaning more heavily to Secretary Clinton as the winner of the presidential contest, the global markets – undoubtedly along with many voters – were just eager to get through this election cycle. With the recent tightening in the polls however, markets are getting nervous.

Why? The long shadow of June’s Brexit referendum in the U.K. plays a role. It was not very long ago that the global markets thought they had that situation figured out: British voters would reject the idea of leaving the European Union and vote “remain.”

But when the results turned out to be different from what polls had predicted, the shock caused financial markets to react with extreme volatility.

So now markets are going into hunker-down mode.

We see that in three currencies – the Mexican peso, the Swiss franc, and gold. (Gold, while technically a commodity, is often treated as a functional currency by the markets.)

The peso is off by around 4 percent this week, reflecting concern over a Trump win, something we discussed a few weeks ago.

The Swiss franc and gold – traditional “flight to safety” assets – are up by about 2 percent this week.

Many other asset classes, such as equities and bond yields, have drifted lower this week and are now freezing up at current levels. Investors are just not ready to aggressively push trading one way or the other with such a close election looming.

My View: I doubt we will see much more price movement among most world asset classes, including currencies, over the next week. We will be back next week to talk about the immediate aftermath of Tuesday’s vote, so stay tuned.

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