It’s an all too familiar scenario; the population of the US setting themselves down for an evening in front of the television to witness personal insults, conspiracies and controversies by the minute.

But this isn’t a run-of-the-mill US reality TV show. Tonight, the third and final US presidential debate takes place between Democratic candidate Hillary Clinton and Republican nominee Donald Trump.

The previous two debates have provided short term opportunities for investors, but the final televised debate in Las Vegas could provide long-lasting market movements before the election on November 8. Below is an outline of possible market outcomes resulting from a victory for either candidate:

Clinch-ton?

Should Hillary win tonight, the US dollar (USD) would likely strengthen as forecasts for a rate hike before year end increase and markets breathe a sign of relief that the status quo will be maintained. However, a Clinton victory with Trump slating the party that nominated him could also pave the way for a unified Democratic government, which could lead to a subsequent negative reaction from US equities (Dow Jones/NASDAQ).

Despite reiterating that politics does not play a role in monetary policy decisions, the assumption that the US Federal Reserve is more likely to raise interest rates with Clinton holding the Presidency rather than her Republican adversary rings true; from building a wall on the border with Mexico to suggesting that carbon emission targets were created for the benefit of China, alienation of other states could see President Trump finding no lack of enemies willing to withdraw trade agreements.

Look for the reciprocation of the Pound Sterling (GBP) falling further against the Dollar and the potential for the majority US dollar earning UK 100 to react positively.

The focus for many will be on the willingness of Republican candidate Trump to either shelter the Republican party in an attempt to protect seats in congress or whether he will throw caution to the wind in order to protect his own business interests whilst fighting a losing battle. The importance for Republicans of maintaining a congressional majority cannot be overstated; a ‘gridlocked’ government as has been the case over three quarters of the Obama administration (i.e. one where the President is of one party while the house is in control of the other) will, at the minimum, take longer to process new legislation before it passes, and at most fail to pass legislation altogether. This provides markets with a more favourable climate to operate in where policy remains stable.

Top Trumps?

If Trump were to come out as the victor in this final televised showdown, gold is likely to show a notable rally.

Investors have long seen the precious yellow metal as a safe-haven amid heightened volatility, something ‘the Donald’ has provided markets with in abundance over the course of his campaign. A strong performance from the Republican nominee could see the price of the commodity show a sharp increase as investors once again price in the impact on global markets of Trump at the helm of the US.

In direct contrast to a victory for Hillary, it is likely that analysts would also lower their expectations for a Fed rate hike before the end of the year. Aforementioned international alienation and an unpredictable slew of policies may not provide an environment for Yellen and chums to tinker with monetary policy. Consequently, the US dollar may sell off, in turn making commodities such as gold cheaper. 

This election will move markets

This year’s US presidential election campaign has proved one of the most divisive and controversial of all time, the result of which could have a greater global implication than ever before. Whatever the outcome of tonight’s debate, come tomorrow morning you can be sure that markets will have priced-in revised expectations for who will take the Oval Office on November 8.

Is your portfolio prepared?