Opinion | Amid all the US election noise, investors need to keep calm
In a presidential race that is still too close to call, any investment positioning will be mere speculation
A pivot event occurs when a material outcome is expected upon the release of news at a known point in time. For the US election, that moment comes when mainstream US news outlets declare the results (formal concessions now seem outmoded). In investment, a pivot event might be an important set of earnings results or a regulatory decision about a big acquisition.
As the pivot point approaches, the wisdom of the crowd often naturally leans towards the favoured side. Markets get an inkling of where the situation is headed, news might leak into the markets or indirect indicators point towards the eventual outcome. The invisible hand will move prices according to the growing probability of the outcome.
When forecast probabilities narrow rapidly as we approach the pivotal event, we reach what I call the zone of realisation. This can happen sometime before the event, such that the outcome may be reflected in prices by the time the news is released.