The electors will cast their vote on December 19 with the Congress approving the results on January 6, 2017. The US president elected will take office at the inauguration on January 20.
SHORT-TERM SCENARIOS
Clinton's confident victory would be the most straightforward scenario for the markets because despite Trump's "whining" about a rigged election he is likely to concede quickly should he lose the popular vote by 3 percent or more.
Clinton's narrow victory promises new uncertainties.
"If the vote is particularly close, [Trump] cries that the election is rigged and demands some kind of investigation into 'Get out the vote' practices by Democrat operatives on the ground, etc… The uncertainty could drag on for days and even weeks," Hardy said.
If Trump wins, it will only happen by a small margin. It will take an entire night to see whether he got the majority of votes.
"If Trump prevails in the end, we would expect this to serve as a stimulus for a strong 'risk-off' trade: the USD would likely tank against the JPY (USDJPY 100?) and EUR (EURUSD 1.1500?) and CHF. Elsewhere, the Mexican peso could be in for a shocking reassessment – sending USDMXN perhaps to 20.00 or higher and the riskier currencies might gyrate first higher and then lower (due to risk-off) versus the greenback. The key uncertainty is on the future of the Fed [Federal Reserve] leadership as Trump has explicitly said Janet Yellen would be out. It’s far less against the riskier currencies; the USD might lose far less ground, as these tend to be sensitive to a drop in risk appetite that would likely accompany a Trump win," Hardy said.
The tie is almost an unthinkable scenario, but one should not write it off, given the number of states in which the candidates have almost equal chances.
"All bets are off on how long it would take the electoral college/Supreme Court (possibly divided 4-4 as it is missing a justice)/House of Representatives (247-188 in favour of Republicans) to make a decision about who will be the next president. This would mean very ugly, two-way volatility at constant risk of large reactions to the latest headline – almost untradable," Hardy added.
LONG-TERM SCENARIOS
The US Senate could tilt either way while the House of Representatives is likely to remain in Republican hands. The distribution of power in the Congress is of utmost importance for the future president.
"The assumption is that a Clinton presidency with only the Senate (not a given) on her side would mean very little in the way of new policy for the next two years. Meanwhile, a Trump presidency could still mean a lack of new policy, even if both houses are in Republican hands, as a subset of Republicans are overtly anti-Trump," Hardy said.
If Trump wins, there are higher odds of new policy, "especially on corporate profit repatriation (most likely area for bipartisan cooperation) or on fiscal stimulus at the margin, the bigger risk that will linger well into 2017 will be the future of the Federal Reserve, as Trump has been explicitly anti-Yellen."
