I’ve got good news or bad news for you.
The last two weeks haven’t changed anything.
It sure feels like it should have.
You’ve seen the videos, headlines, and everything else.
You don’t need (or probably want) a rundown.
Despite it all though, according to European betting markets, Hillary is still the strong favorite to win in November.
The payout on a Hillary bet stands at about 50 cents on the dollar. Same as it was a year ago.
Trump’s odds have improved a bit, but he’s still nothing close to a favorite. A bet on him winning is down to about $1.30 for every dollar bet. That’s down from $2.00 or so when he won the Republican nomination.
Even though the odds haven’t changed much, but the market’s realization of the real potential of a Trump presidency sure has and it’s creating a win-win investment opportunity.
Get Over It
We’re no political handicappers here.
It’s a fool’s game predicting the unpredictable.
What will happen in a few days or weeks? What’s the next big leak? What’s the “October Surprises” both campaigns have in store? Will any of it matter?
There are just too many questions.
However, we can see some trends emerging which are perceived to be driven largely by the U.S. presidential election.
One of the biggest trends is collapse of the Mexican peso.
Over the last year the peso has fallen about 10% against the U.S. dollar.
That’s a pretty big swing in the foreign exchange market.
The media has a theory about what’s driving down the peso too.
They suggest it’s because of Trump. As his odds improve, the peso drops.
It makes sense too.
If there’s a wall built, NAFTA is revised, or remittances sent by U.S. people to family members in Mexico are curtailed, there’s going to a big hit to Mexico’s economy and the value of the peso.
That’s all well and good. A simple narrative. But it’s probably not right at all.
Oh No vs. Status Quo
The problem is the Mexican peso has been in structural decline against the U.S. dollar for five years now.
Over that time the value of the peso has dropped 50%.
The 10% downswing this year is just another step in the trend.
The trend has been long and will end eventually. It just needs a catalyst for a turnaround.
That catalyst may come Wednesday, November 9.
That day the market may realize that Trump isn’t nearly as bad as everyone thought (that’s what I’ve been told what happened shortly after Reagan was elected and he wasn’t endlessly demonized).
Or it may come when Hillary gets in and everyone will be set for four more years of the status quo.
Right now Mexico is cheap. But it’s still getting cheaper. When it turns it will be time to buy. That time may be just a few months away.