Who do you think will win the US election? Hillary Clinton Why will he/she win? I think Hillary Clinton has a much higher chance to win, particularly following the first presidential debate, because Donald Trump has exposed his ignorance and innocence to voters and investors around the world. Hillary Clinton’s victory is a much desired outcome by the capital markets, because Mr Trump will bring too much uncertainty, which markets tend to dislike. Volatility set to pick up as election day nears By Margaret Yang, CMC Markets Singapore The debates so far have seen heightened volatility, and the dollar index in particular may experience choppy trading during the 90-minute live shows. Clinton leads after initial debates Hillary Clinton currently leads Mr Trump by around 3 or 4% according to the latest polling average. Equity markets have been cheerfully rallying, with a Trump victory becoming less likely following the first presidential debate on 26 September. It certainly appears that markets dislike the uncertainties that Trump could bring to the table were he to become US president. However, markets could have priced in a Clinton victory too early, and thus sentiment will become more fragile if there are any surprises in the third debate. Market reaction should Trump succeed If Mr Trump is elected, the impact could be far-reaching and market volatility may surpass that seen during the UK’s Brexit day. Uncertainty may push up prices of perceived safe-haven assets such as gold, the Japanese yen and treasuries, while equities will probably experience panic selling. For China, Singapore and other ASEAN markets, a Trump victory will bring significant uncertainty and unwanted consequences. His international trade policies are broadly protectionist, especially against Chinese and Mexican imports. These protectionist trade policies are aimed at moving the jobs “stolen” by emerging economics back to the US, and ultimately at increasing US industrial growth and employment. However, Mr Trump is against free trade agreements, including NAFTA and TPP. He has advocated implementing high tariffs (35-45%) on China and Mexico imports, and threatened to build a "Mexican wall" to intercept illegal immigrants. Given the fact that trade from these countries has accounted for around 60% of global GDP in recent years, Mr Trump’s protectionist stance could well have an adverse impact on global economic growth in the long run. Furthermore, he attacked China as the biggest currency manipulator, arguing that the country devalues its currency to gain an unfair advantage in trades, and says he is going to end that (I guess this would be much appreciated by the Chinese authorities as they’ve been trying hard to prevent fast devaluation of the yuan in recent years). He also said the US’s allies need to "pay in full" to enjoy US military protection, which will raise political uncertainties in the region. All these statements, though not necessarily implementable, will raise concerns for those export-oriented, emerging economies if Mr Trump succeeds. Risk premium not yet priced in The US political risk premium has not yet been priced into Asian currencies and shares, rendering emerging countries susceptible to potential surprises. Investors should remain cautious until the final election result is known. During the Brexit vote four months ago, too much optimism had been priced in before the vote count was released, so that when the shock results came out, markets simply tumbled. Investors could start to look at commodities like gold and silver to diversify their portfolio, and hedge against the potential risks ahead of election day. Currently, the equity valuations of developed markets including the US, Europe and Japan are relatively high, while Singapore and other emerging markets are relatively low. Therefore, some investors may view this as an opportunity for some portfolio rebalancing.