Banks are elec­tion’s flash point in stocks


Whilestrate­gist­sand­pun­dits fall over each other pre­dict­ing how the US pres­i­den­tial race will play out in mar­kets, the stock mar­ket it­self has a clearcut view on which in­dus­try is most at risk: the banks.

Fi­nan­cial in­sti­tu­tions come up far more of­ten than any other in­dus­try when share price cor­re­la­tion is plot­ted for sen­si­tiv­ity to Don­ald Trump and Hil­lary Clin­ton’s elec­tion odds. Among the 100 stocks in theS&P500 with the strong­est ties, com­pa­nies from JPMor­gan Chase & Co to Pro­gres­sive Corp, are mov­ing the most based on politics. Their clear pref­er­ence is for Trump.

“There are things Democrats want to do that could hurt th­ese com­pa­nies and things Repub­li­cans want to do that will help them, and that’s why th­ese cor­re­la­tions are so strong,” said Dan Clifton, head of pol­icy re­search at Strate­gas Re­search Part­ners in Wash­ing­ton. “Fi­nan­cials are not priced for the event that you get a Demo­crat sweep. Mar­kets are paying more at­ten­tion to Fed pol­icy and not enough to the elec­tion.”

It’s not like bank share­hold­ers need more drama this year. Fi­nan­cial stocks be­gan 2016 by plung­ing 18 per­cent over six weeks, dragged down by con­cerns a re­ces­sion was about to steam­roll their lend­ing busi­ness. Scan­dals, fines and fir­ings have dogged the group since the bot­tom in Fe­bru­ary, with volatil­ity crest­ing af­ter Bri­tain’s vote to leave the Euro­pean Union sent banks down 8 per­cent in two days.

Heavy cor­re­la­tion to the can­di­dates is some­thing else to process for bulls and bears as theUS Fed­eral Re­serve con­sid­ers higher in­ter­est rates and signs of in­fla­tion emerge in the econ­omy. Flows into and out of bank shares have been among the heav­i­est in the S&P 500 this year.

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