Opinion: If Clinton becomes president, this relief rally will have staying power - MarketWatch

Early voting is over in Florida and Nevada, but it's still going on in world markets. Their verdict: Hillary Clinton will win the U.S.  presidential election.

On Sunday afternoon, FBI Director James Comey informed Congress that a search of disgraced former Rep. Anthony Weiner's computer revealed no new information about Hillary Clinton's use of a private email server while she was U.S. Secretary of State. He reiterated that criminal charges against the Democratic presidential candidate were unwarranted^[1].

Since Comey's bombshell October 28th letter to Congress revealing the existence of those emails and the need to investigate them, the markets have been in a tizzy. The S&P 500 SPX, +0.38%^[2]  fell for nine straight trading days for the first time since 1980; both the Dow Jones Industrial Average DJIA, +0.40%^[3]  and Nasdaq Composite Index COMP, +0.53%^[4]   also were hit hard. The CBOE Volatility index VIX, +7.31%^[5]  spiked from a mild 13 on October 24 to a high of 23 on Friday.

But when Comey said, in effect, "never mind," markets soared.

2016 v. 2012: Comparing polls on the eve of the election

(2:40)

Polling from the Romney-Obama race four years ago shows that the 2016 election cycle is actually not as competitive as that race was, though it may feel more contentious. Here's a look at the numbers.

It didn't hurt that early voting in Florida shows a 129% jump in Hispanic voters^[6] over 2008 or that in Clark County (home of Las Vegas and source of 70% of Nevada's votes), Democrats — powered by massive Hispanic turnout — produced a record advantage of about 73,000 votes. That led Nevada political maven Jon Ralston to declare "there simply are not enough votes left for Trump to win^[7]" in that critical swing state.

Overseas traders and investors never took American civics courses, but they've learned to count electoral votes as well as the most hard-bitten U.S. politico. So, when Comey's statement and the news about early voting broke, markets went wild.

The Mexican peso, a proxy for anxiety over a Donald Trump victory, jumped to near a two-week high^[8]. The U.S. dollar DXY, -0.32%^[9]  also firmed. A stock rally began in Asia, where Japan's Nikkei 225 NIK, -5.36%^[10]  closed up 1.6%. Asia passed the baton to Europe, where the German DAX, the French CAC 40, and the UK's FTSE 100 surged 1.7-1.9%.

The rally picked up steam on Monday in the U.S., where the Dow  was up 350 points^[11] in midday trading; the Dow, the S&P 500, and the Nasdaq were all around 2% higher. The VIX  fell back into the high teens.

As I've written repeatedly in this column, the potential election of Donald Trump has been the biggest risk to investors^[12] over the last couple of months.  In Wall Street's eyes, Trump is Mr. Uncertainty, while Hillary, especially with a Republican Congress, means gridlock and more of the same, which is probably good for stock prices but not necessarily for the country.  (At one point, Wall Street was getting too worried about a Democratic sweep of Congress^[13] that could bring new powers to the likes of "progressive" Senators Bernie Sanders and Elizabeth Warren.)

< p>Beyond the political risk, the market's fundamentals look good^[14], as I wrote last week. A strong GDP figure and a solid October jobs report last Friday underscored that the economy is in decent shape.  That is likely to prompt the Federal Reserve to raise the federal funds rate by 0.25% in December, but rates remain very, very low.

According to FactSet Research, as of last Friday, 71% of S&P 500 companies had beaten earnings estimates and 54% have reported better than expected revenue growth for the third quarter. The five-quarter-long earnings recession is likely over^[15].  And that heightened VIX suggested overly bearish sentiment^[16], which now appears to be turning in the other direction.

Of course, this election could surprise us, especially if Trump voters turn out en masse in key states, where the polls remain extremely tight. But without Nevada, his path to the White House would be very steep. Without Florida, it would be almost nonexistent.

Investors and traders already have called the election in Hillary's favor. If they're right, it removes the last big obstacle to a market rebound just as we enter the most favorable season for stocks in the calendar. Let the rally continue.

Howard R. Gold is a MarketWatch columnist and founder and editor of  GoldenEgg Investing ^[17] , which offers exclusive market commentary and simple, low-cost, low-risk retirement investing plans. Follow him on Twitter @howardrgold.

References

1. ^{^} were unwarranted (www.marketwatch.com)
2. ^{^} SPX, +0.38% (www.marketwatch.com)
3. ^{^} DJIA, +0.40% (www.marketwatch.com)
4. ^{^} COMP, +0.53% (www.marketwatch.com)
5. ^{^} VIX, +7.31% (www.marketwatch.com)
6. ^{^} 129% jump in Hispanic voters (www.cnn.com)
7. ^{^} not enough votes left for Trump to win (www.politico.com)
8. ^{^} near a two-week high (www.marketwatch.com)
9. ^{^} DXY, -0.32% (www.marketwatch.com)
10. ^{^} NIK, -5.36% (www.marketwatch.com)
11. ^{^} up 350 points (www.marketwatch.com)
12. ^{^} the biggest risk to investors (www.marketwatch.com)
13. ^{^} Democratic sweep of Congress (www.marketwatch.com)
14. ^{^} , the market's fundamentals look good (www.marketwatch.com)
15. ^{^} is likely over (www.factset.com)
16. ^{^} overly bearish sentiment (www.marketwatch.com)
17. ^{^} GoldenEgg Investing (goldenegginvesting.com)