U.S. stocks have gone on a downward spiral after this week’s surprising turn of events. The FBI reopened the investigation of the Hillary Clinton email question.
This has only expanded the level of political uncertainty in an already crazy Presidential election.
FBI probes Clinton emails
The bear market comes right after a particularly high note the market struck when the government reported a breakout from a two-year economic slump in stocks. FBI Director James Comey announced the bureau’s new probe into Clinton’s emails.
Comey reported that there were more emails that possibly might be pertinent to political decisions Secretary of State Clinton made in the past. “In connection with an unrelated case, the FBI has learned of the existence of emails that appear pertinent to the investigation,” Comey wrote in a statement published on CNN.
“I am writing to inform you that the investigative team briefed me on this yesterday," Comey said, "and I agreed that the FBI should take appropriate investigative steps designed to allow investigators to review these emails to determine whether they contain classified information, as well as to assess their importance to our investigation.”
He admitted that it was not clear yet whether the investigation would actually turn up anything significant. This is a startling turn of events since Comey defended Clinton last July and said any imaginable charges against her would be irrelevant.
Could this have anything to do with Clinton’s expected win in the national election tomorrow? The polls have agreed that Trump will lose and Clinton will be elected. Uncertainty about the behavior of the frontrunner for the presidential office might inspire some Americans to switch their vote.
“This throws such a monkey wrench into anyone’s ability to predict what will happen over the next couple of weeks,” Wayne Kaufman, chief market analyst at Phoenix Financial Services, said on MarketWatch. “Most people had been predicting a Clinton victory, and all of a sudden the waters are muddied again. Markets hate uncertainty more than anything else.”
The market drops
Whatever the reason for the FBI probe, the market took a substantial hit, according to the L.A. Times. “The Dow Jones industrial average closed down 8.49 points, less than 0.1%, at 18,161.19,” the report said. “The index was 80 points higher shortly before the new inquiry was disclosed, then went down as much as 74 points in the minutes that followed. The Standard & Poor’s 500 index fell 6.63 points, or 0.3%, to 2,126.41. The Nasdaq composite slid 25.87 points, or 0.5%, to 5,190.10.”
The Times also reported that health care companies had suffered the largest losses, particularly prescription drug manufacturers and distributors. Health care stocks have been performing the worst already this year, so it is not too surprising they took such a big hit.
Connection between FBI investigation and stock drops
There is a lot of controversy over Clinton’s deleted emails. To some, it suggests that she might have been careless in her dealings as Secretary of State. For others, the investigation is a diversion that has no bearing on their vote.
To have the FBI director come forward and say that the emails might actually mean something heightens an apparent lack of faith and confidence in the current candidates.
The most profound connection has been the instability of support for the candidates being reflected in the instability of the market. When investors do not have a lot of faith in the market, it becomes more volatile, and uproars in politics can have a lot to do with that.
In addition, though it is unlikely at this point that Trump will win on Nov. 8, a significant email scandal could take Clinton out of the picture entirely, which would increase his chances of winning.
But Trump has said that he plans to take on Wall Street if he is elected and will look to raise taxes on the rich and reduce some of the power currently held by market investors. That creates more uncertainty as well.
Growth likely to return
There is inevitably some fluctuation in the market during an election year because of the mystery surrounding the economic decisions of the new president after taking office. But analysts expect it will not be long before the growth pattern returns.
In the latest quarter, U.S. GDP jumped 2.9%, which was much higher than predicted. That is the strongest growth the U.S. has seen in more than two years.
“This shows that the U.S. economy is roughly on track,” says Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management. Though it is always worthwhile to watch the market closely during election season, future growth is the general expectation, which should stimulate greater faith in the market.
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