News
Election Follow-up: Probability-Weighting Forecasts
The result of the United States presidential election last week delivered more than just a surprising new Commander in Chief–the markets surprised, too. Initial reactions to the news that Donald Trump was the likely winner at approximately 1:00 EST shocked markets and crushed risk appetite – much as many had expected. Risk was immediately dumped in favor of the usual havens, including gold and CHF, and equity vol jumped more than 20 percent in the early hours. But, as time wore on, prices settled and liquidity improved. As the opening bell rang Friday morning, we were witness to far-reaching reversals as stocks pared losses and pushed on to making strong gains by the end of the day.
Below I illustrate the extent to which markets moved from initial reactions to twelve hours following:
Forecast | ||
Probability (approx.) | 0.8 | 0.2 |
Asset Class | Clinton Wins | Trump Wins |
USDCHF | 2% | -4% |
US Bond Prices | -1% | 2% |
US Equities | 1% | -3% |
Gold | -1% | 5% |
Volatility | -5% | 20% |
Initial Reaction | Change on close (01.00 ET) | Forecast |
USDCHF | -2.0% | -4% |
US Bond Prices | 0.4% | 2% |
US Equities | -3.7% | -3% |
Gold | 3.9% | 5% |
Volatility | 19.0% | 20% |
12hrs Later | Change on prev. close (13.00 ET) | 12hr Change (% Points) |
USDCHF | 0.5% | 2.5% |
US Bond Prices | -2.3% | -2.7% |
US Equities | 1.0% | 4.7% |
Gold | 0.1% | -3.8% |
Volatility | -2.2% | -21.2% |
The above table captures the potential nature of event risk outcomes–limit down one moment to unch and then higher within hours. What is crucial to note here is the biggest movement of capital happened sometime after information was known, not as it was known, like many are more familiar.
Below is an example of how clients can assign probabilities to forecasts, which in turn allows for an overall estimated expectation of event outcomes:
Aggregated by Strategy
Strategy drill-down
Being fortunate to predict an initial reaction matters if exposure to prices stops there–the reality can be markedly different.
Related News

Insights from Interns
Our most recent interns, Nicholas and Timur, both joined us from Imperial College London where they are going into the third year of their Mechanical and Aerospace Engineering degrees, respectively. They spent 11 weeks working with TS Imagine’s Professional Services team in London this summer under the supervision of myself and Simarjit Johal (Regional Team Lead).

The Dollar Milkshake Theory – Stress Testing the Potential Impact of a Sovereign Debt and Currency Crisis
Stress Tests play an important role in improving financial stability by enhancing market discipline and transparency. Here we consider the third example of these stresses based on current market conditions and show how the risk factors can be generated along with their relevant shock examples.

Europe, Russia & Energy – Simulating the Market Impact of Price Caps and the Cost of War
Since the start of the war in Ukraine, Western nations have imposed sanctions on many Russian individuals, businesses and state-run enterprises. Stress Tests play an important role in improving financial stability by enhancing market discipline and transparency.