Top Links: ‘Bonds face pain no matter who wins’

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A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Most markets, with the notable exception of precious metals, are higher this morning after the FBI gave the all-clear regarding their investigation of Hillary Clinton's emails. The market is unlikely to provide useful signals in the next few days, however, as it digests the election results.

Polling is hard to figure. The New York Times' Upshot section estimates a 16-per-cent chance of a Trump win but Bloomberg's final poll puts Mrs. Clinton only three points ahead, a result that is within the margin of error.

Morgan Stanley published a report entitled "US Election Week: What Truths May Come", where they discussed 'what's at stake?' for global investors tomorrow,

"Divided governments, by our count, have historically only allowed about 25% of campaign promises to become policy. Hence, should either candidate win but face a chamber of Congress controlled by the opposing party, then policy 'incrementalism' – the idea that only small, gradual progress toward the President's goals will be made – should be the norm. However, if either candidate wins with an undivided government, then a more transformative path is possible. For Trump, we think that means the possibility of a tax cut-driven stimulus and larger tax-code reforms with increased trade protectionism, areas where he has the motive and opportunity to act. For Clinton, we think it raises the possibility of limited corporate tax reform, action on drug pricing, and a heavier hand in financial regulation."

"‏@SBarlow_ROB MS: What's at stake for markets?" – (research excerpt) Twitter
"U.S. Election Guide to Markets: What to Watch With One Day to Go" – Bloomberg
"Clinton 3 Points Ahead of Trump in Final Bloomberg National Poll" – Bloomberg
"Hillary Clinton has an 84% chance to win." – NYT Upshot

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When the political furor dies down, hopefully quickly and violence-free, rising bond yields are likely to be the biggest investor concern,

"Obama's administration benefited from some unprecedented advantages that helped it grapple with the longest recession since the 1930s. The Federal Reserve kept rates at historically low levels, partly by becoming the single biggest holder of Treasuries. The U.S. could also rely on insatiable demand from international investors… Now those tailwinds are turning around. The Fed is telegraphing more hikes at a time when interest costs on the nation's bonds are already the highest in five years … We've really got ourselves into a pickle here," said Edward Yardeni, president of Yardeni Research Inc. in New York, who's been following the bond market since the 1970s. 'All these years we've been kicking the can down the road, and suddenly we're seeing a brick wall.'"

"Obama's Successor Inherits Bond Market at Epic Turning Point" – Bloomberg
"U.S. Election: Bonds Face Pain No Matter Who Wins" – Wall Street Journal
"@SBarlow_ROB MS notes a 'significant change' is U.S. wage growth " – (research excerpt) Twitter

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Longer-term readers will know my belief that the Art of War maxim "know yourself" is more important to investors that any specific stock picking methodology. A Quartz report contributes to the topic by outlining the complicated, emotional ways human psychology deals with money,

"The theory advanced by the economist Richard Thaler, famous for the behavioral theory 'nudge,' is that we have different 'mental accounts.' We assign different characteristics and purposes to different portions of our money. "Spending money" is different from savings. Money you win in a bet is different from m

"Money you earn. Even as an adult, the £10 note sent by a great­ aunt in a Christmas card is more exciting than the £20 note I've just collected from a cash machine."

"This classic thought experiment explains the weird decisions we make about spending money" – Quartz

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Tweet of the Day: "@carlquintanilla Prediction mkts assigning higher probability of Clinton win than polls suggest -- @GoldmanSachs ' – (chart) Twitter

Diversion: Warning – Hey Jude is on the list. "Are These the 20 Worst Songs of All Time?" – A Journal of Musical Things