Why the Futures Market Is Tanking Right Now
You're not the only one biting your nails nervously.
The futures market started nosediving dramatically on Tuesday during an unexpectedly tight presidential race.
So what does it mean to be a future market? It’s — as the name says — about the future. Stock markets consider what a product is worth now. Futures markets, on the other hand, consider what commodities are worth at a fixed point in time — a few months, or even a year hence. That’s important because it means we’re thinking about not just what gas, for example, will cost next year, but what political climate could either drive the cost of gas up or cushion it downwards.
In the case of what’s going on as of Tuesday night’s suddenly tight election, the markets are acting as a blood pressure check of sorts. Hillary Clinton was widely favored to win this election easily and handily, but Trump’s surprise, solid performance are showing that our forecasts literally were wrong. If our forecasts were wrong, what else might have been wrong? The futures react the way an intensely anxious middle schooler might: by freaking out.
Ironically, the reason why futures markets are a thing in the first place is for volatility — which means the reason why the markets are diving is not because the economy fears a Donald Trump win so much as a near-future where the leadership of the United States remains fuzzy. The fact that this had been so confidently predicted as a clear sweep in Democratic candidate Hillary Clinton’s favor means that expectations were wrong — and that the futures market is equally rattled.
Internationally, this isn’t looking too good either. One way to measure it is the country we do a lot of business with — Mexico.
If you’re worried sick, take comfort in the fact that elections aren’t exactly boosts for the economy: Stock markets dived after Barack Obama was elected in 2008 as well. As ABC noted then, “In Europe, Great Britain’s FTSE 100 fell 2.3 percent, the German DAX lost 2.1 percent and France’s main index was down 2 percent. Asian markets were up 2 percent to 4 percent, following a strong rally on Wall Street Tuesday.”
In short: Markets have a negative view of the future, and elections are notoriously scary times for not just voters but elections. But when markets aren’t betting strongly on the future of the price of basic commodities, it means not just America but the world is teetering on nervousness and an increasingly nerve-wracking future.
