It’s here

With a creepy accuracy of almost nine out of ten, the American stock market has picked the next American president since 1928. When the S&P advances in the three months prior to the big vote, the incumbent party wins. When it doesn’t, the other guy gets in.

The score so far: the market’s down. A fair amount actually – about 4% since the beginning of August. At the same time the goofy billionaire has been advancing in the polls, especially since Friday when the FBI shocked everyone, saying it was diving once again  into Clinton’s email hell. Worse (for investors with weak bladders) both camps have hired a few thousand lawyers, girding for a post-election fight. In other words, this might not actually be over next Tuesday night. Bummer.

Unless the outcome is “clear”, Trump says he might not concede. If some key battleground states are lost in a narrow vote, then Clinton might not accept the results, either – without a recount and a legal challenge. In short, the weirdest, most divisive and unlikely election in our lifetimes has the potential to turn into a giant, post-coital mess.

The Vix is spiking as a result. That’s the so-called ‘fear index’ which presages big burps ahead for equity markets. It jumped about 20% on Tuesday to the highest level since the summer on fears of (a) President Trump or (b) no clear election result. Add in a 70% expectation the Fed will raise interest rates next month, and you have a strong recipe for stress.

Markets still think Clinton will win. And she should, based on a big early-vote turnout, the fact Trump has irritated a majority of voters and the peculiarities of the Electoral College system. But remember Brexit? All the financial smarty-pants thought that vote was in the bag and Britons would never be daft enough to toss a lucrative free trade pact. But they did. Stocks recoiled (briefly) and bonds spiked. Traders scrambled to cover their wrong bets in the days that followed, and are leery of repeating the mistake.

Hence, today’s triple-digit pasting on Wall Street. Safe to say some more may follow. Despite a jump in economic growth, good labour data, recovering corporate profits and a massive machine behind her, the status quo candidate looks weak. She could hardly get rid of that pesky commie Bernie Sanders. Now she’s being run down by a guy who would separate people by religion, build a wall on the border and talks about women like a 13-year-old from juvie.

Well, don’t stop gumming your cuticles yet. There’s more. Interest rates just went up.

It’s started with TD Bank, causing panic in the mortgage broker business Tuesday afternoon with a hike in its prime mortgage rate of 15 beeps, to 2.85%. This is a big deal. TD’s a major lender. It means millions of people with variable-rate mortgages will be paying more, effective November 1st (which is now). This also confirms fears that after Wild Bill brought in his mortgage mayhem rules on October the 3rd, big lenders would soon start passing on higher anticipated financing costs.

And, yes, this reflects a global bond selloff that’s been quietly taking place for weeks now, as yields rise and prices fall. Some sweet manufacturing data from China this week helped propel things along, easing fears about slow global growth and suggesting the bottom for rates is – or soon will be – in the rear view mirror. Expect to have this confirmed by the Fed four weeks from now.

By the way, this rate change at TD is the first in a year, and widely expected to set the standard for other banks. As one broker told an industry web site on Tuesday: “When a bank changes their ‘version’ of bank prime it also serves as an invitation for the other banks to join in and do the same. Naturally if they all change the public is screwed and all the banks make more profit.”

Meanwhile in Ottawa our finance minister was busy Tuesday afternoon announcing $81 billion in new federal spending (we don’t have) for transit, infrastructure and lots and lots of shovels. It was exactly the news the Bank of Canada has been praying for – fiscal stimulus coming from government largesse and taxpayer debt instead of monetary stimulus through another cut.

In short, Canadian rates won’t fall. TD proves they’re going up. So houses are going down. Hillary, too?

Don’t bet on it.