Wednesday, November 9, 2016
Donald Trump, the first U.S. nominee in modern history to have never held elected office, has shocked the world by winning the office of the Presidency. When results in the later states began to hit the tape last night, Dow futures sank deeply. By the time the announcement was made that Trump had won, the Dow was down a whopping 800 points.
It has since rebounded to only semi-disastrous levels: -266 points. The S&P 500 is down 34 points and the Nasdaq down -100. Digging deeper than the overall indices, we are seeing Mexico-related shares — Trump has been emphatic on the campaign trail about building a wall on the Mexican border “and making the Mexicans pay for it” — such as the iShares MSCI Mexico ETF (EWW - Free Report) and Mexican been distributor Constellation Brands (STZ - Free Report) tumble precipitously in the pre-market. The Mexican peso is now trading at all-time lows.
European stocks slid following the election results, as did the Japanese Nikkei market, which fell 5.4%. Obamacare-centric healthcare organizations like Tenet Healthcare (THC - Free Report) , down 31%, and HCA Holdings (HCA - Free Report) , down 14.7%, are faring even worse. Canadian Solar is -9%.
On the other hand, we are seeing a boost to things like Gold futures (+2.5%) and coal-focused energy firms like Consol Energy (CNX - Free Report) , +8.4%. We see a spike in bond yields; the U.S. 10-year has bounced up to 1.95, though still in historically low territory.
As we’ve discussed in this column and elsewhere in recent weeks, the stock market prefers gridlock. Slow advancement in changes to policies — where there is change at all — helps the market digest what’s happening easier in real time, and the best way for that to happen is for the Executive branch (White House) under the control of one party and Congress under control of the other. This election throws all that out the window — the GOP now holds all three; the main question looks to be how much Trump is interested in keeping with what his party wants.
Much will ride on the deals Mr Trump has insisted he will be able to make on behalf of the country. Whether or not the Trans-Pacific Partnership (TPP) will be torn to shreds and replaced with something else — and whether or not our main trading partners, the Chinese, will go along with it — remain to be seen. Trump’s lack of a voting record on geopolitical issues like the Middle East are also big question marks going forward for sectors like the Defense industry.
Finally, will Trump’s stunning — nay, ‘yuge’ — upset have any affect on the Federal Reserve? Meaning: more than whether the Fed will decide to raise interest rates a quarter percent next month, but even whether the institution deserves to exist. Perhaps Janet Yellen will offer her resignation in the wake of Trump’s victory? Or, maybe more fitting, Trump will sit her down in his office, cameras rolling, and utter his well-known trademark phrase, “You’re fired.”
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