-Analysis-

BUENOS AIRES — Stock markets are said to anticipate the preferences of voters. Business is business, and markets always look to tomorrow, which is then factored into today's values. The problem is that the future is unclear and often inscrutable, and markets are not infallible. Brexit, the nose of traders assured us, would never happen.

The U.S. election presents another murky perspective, with even bigger stakes.

The longest running and farthest reaching campaign in history — judging by the media coverage — offers one advantage, namely the ample information provided on the degree of market sensitivity to the two very different contenders: Donald Trump and Hillary Clinton.

Their starkly contrasting figures facilitate market readings, and while one cannot know with certainty who will win, we have an idea of the reactions each would provoke — at least right away. A taste was given by rising share prices in response to Trump bungling the first presidential debate, and the boost given to the Clinton candidacy.

If Trump were to win, Wall Street and stock markets in the UK and Asia would likely fall between 10 and 15%, oil would lose four dollars a barrel and the Mexican peso would plummet 25%. There would be a significant rise in volatility.

That is the "precise" conclusion reached by Justin Wolfers and Eric Zitzewitz at the National Bureau of Economic Research (NBER), after examining the feedback registered from the performance of financial assets, after the first debate on Sept. 26. Conversely, the sudden turn in the campaign prompted by the FBI reopening its inquiry in the Clinton emails, confirmed the reactions to a sudden upturn in the polls of the Republican candidate.

Generally speaking, Clinton squares with a more solid economy and Trump is associated with high and persistent risks. There is no Republican "bonus" now with Wall Street, which has swept away the market's past preference for the Grand Old Party. Wolfers and Zitzewitz believe an implicit "Trump discount" will push stock prices down between 9-12%.

The fed hedges too

One should nevertheless distinguish between the immediate impact of the election result and its lasting implications, especially when it comes to any adverse effects. Brexit, for example, prompted a storm of volatility that soon lost its intensity, before discarding almost all its effects within weeks. Does that mean Brexit was irrelevant, and that its effects are over? Certainly not. The real, weighty consequences will emerge as the United Kingdom and European Union hammer out the conditions of their divorce.

The short-term dynamic here illustrates the so-called "black swan" phenomenon — those improbable, difficult-to-predict events with unexpected and sweeping effects. Given the fragile state of the world economy and markets, stock prices on the verge of overvaluation and brittle geopolitical conditions, this is not the time to make waves. The post-Lehmann Brothers markets have shown a propensity to sudden shutdowns, as shown by a half dozen crash-like episodes since 2010 and abrupt price drops that have for now, thankfully, proved ephemeral. Still, nobody can be sure any event will not trigger a domino effect.

It is natural to qualify a Trump victory as a repeat of Brexit, though with a crucial difference: Those in the UK who sought to break away from Europe mostly dissolved out of public life after winning. Nigel Farage, the head of the United Kingdom Independence Party, resigned from his position once results were announced. Brexit was a defeat for the establishment, but the elite remained in place in the form of a Conservative government tasked with managing the departure process.

Trump is another story. His populist agenda is just a part of the problem, which Congress can dilute. Of greater concern is the possibility of his filling the administration with utterly inexperienced functionaries.

Will the Federal Reserve trigger an interest rate hike in December? Futures markets think it is 75% probable. But monetary policy is conditional, and there may be no increase if Trump unleashes an economic and political storm. In response to Brexit, the Bank of England lowered its rate, eased credit supplies, promised tax cuts (yet to happen), then crossed its fingers.

If investors think it is 75% probable that the Fed will raise rates, it must be because they think it equally probable that Mrs. Clinton will become president of the United States.