Citi predicts possible 5% drop for S&P 500 if Trump wins, warns on recession

[HAB911]

A Donald Trump win could spark an immediate sell-off of up to 5 percent for the S&P 500, according to analysts at Citi, who also warn on slower growth or even recession for the U.S.

A survey run in September by the U.S. investment bank showed Wall Street strongly believes Hillary Clinton is set to clinch victory in next week's vote but the poor performance of U.S. equity markets in the wake of last Friday's news of the latest FBI probe into the Democratic candidate's emails, shows concerns of a Trump win are mounting.

According to the latest note out from global equity strategists at Citi Friday, fears for stocks after a Trump victory are two-fold.

In the longer-term says the research team, "A Trump win risks slower growth or recession if trade is restricted and fiscal expansion plans curtailed. Uncertainty alone could hit the economy. Global growth will also be impacted if uncertainty rises, U.S. growth is hit and U.S. financial conditions tighten."

Yet even in the immediate aftermath of the vote, markets could drop, according to Tobias Levkovich, the chief U.S. equity strategist at Citi.

"If Donald Trump were to win, that outcome would have been unexpected and thereby may cause a jump in the equity risk premium with negative P/E (price –to-earnings) multiple repercussions. We think a Trump victory could spark a 3-5 percent setback in the S&P 500," summarizes the Citi note.

The price-to-earnings ratio is a key valuation metric for stocks which gauges how much an investor must pay on the stock market for each cent of earnings.

The overwhelming majority of commentators also see the same trajectory for the S&P 500, with analysts at Barclays warning markets could drop between 11 and 13 percent in the case of a Trump win as opposed to a 2 to 3 percent bounce if Clinton emerges victorious.



However, in a New York Times article on Monday, Lawrence G. McDonald of ACG Analytics reportedly suggested there was a silver lining to all the current apprehension and negativity.

According to McDonald, "Trump will create a colossal panic, but the relief rally will be outstanding."

"Trump's bark found in his anti-globalization position in reality will be a lot worse than its bite in terms of actual implementation," he continued.

[wishstar]

1. I heard PBS radio analyst warn of drastic hit to our auto industry were Trump to win

Expert made a strong case that our manufacturing industries such as auto that rely on globalization (parts from other countries) would be disrupted and lose competitive edge in ability to profitably export products if his anti-globalization policies were implemented.

[HAB911]

2. It would be a moral, economic, political, disaster.

[DK504]

3. The markets

are already nervous and are fluctuating across the globe. Great.

[jcgoldie]

4. NPR stock market analyst yesterday...

Said the market hates Trump worse than any candidate in recent history red or blue because they have no idea what his policies would look like and he's completely unpredictable. This guy tied short term market shifts to real time changes in predictive markets about the election which unlike the polls respond immediately to breaking election news like Access Hollywood tape or Comeygate. He said based on how the Dow has responded immediately to perceived changes in the likelihood of a Trump victory, they could project that it will likely lose about 12% if Trump wins next week.

[Tom Rivers]

5. this is what trump means when he says he's going to shake things up

[HAB911]

6. Rock the boat, swamp the gunnels, sink the entire boat

[still_one]

7. I think that is an underestimation. Hillary is going to win though

[Dem2]

8. Link?

[jcgoldie]

9. http://www.npr.org/2016/11/03/500545402/as-trumps-odds-of-victory-rise-financial-markets-get-nervous

http://www.npr.org/2016/11/03/500545402/as-trumps-odds-of-victory-rise-financial-markets-get-nervous

[Dem2]

10. Thanks!

I need to share this info with those who "claim" to be conservative.