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Hot Topic – U.S Elections Roller coaster
With the markets having priced in a Clinton win, chaos ensued as Trump took the lead on his way to an upset victory. The Asian markets immediately reacted and on Tuesday night were on the fast track downwards. With the result a foregone conclusion, by Wednesday morning most indices had not only recovered their losses but ended with positive gains. Let’s take a look at the rollercoaster ride the markets went on during the US Elections and what more could happen under Trump regime.
- On Tuesday night, as soon as Trump began to show signs of winning the historic election, Asia-Pacific equities took a mighty fall
- Japan’s Nikkei plunged 5.4%, South Korea’s Kospi lost 2.3%, Australia’s ASX 200 fell 1.9%, the Hang Seng slid 2.2% and China’s Shanghai Composite Index fell to a 10-month low and dropped .6%
- But it didn’t stop there, when the UK markets opened, the FTSE fell by over 146 points at opening, and US equities also dove with the Dow Jones down a massive 800 points
- Meanwhile, the Mexican peso lost a staggering 13.3% – which was a record low against the US dollar
- The quote unquote ‘Trump Slump’ impacted emerging market currencies the most after posting their worst 3 day losses in the last 5 years
- Predictably, the safe haven gold came out on top spiking almost 5% to $1,337 an ounce
- By the end of the election night, more than $1 trillion was wiped off bond values for the week, which had happened only once before in the last 20 years.
After Clinton conceded the election to Trump he delivered what political analysts labeled as a conservative and modest victory speech which immediately calmed the markets
- The footsie recovered by just over 68 points and the Dow Jones closed up 1.4% for the day
- The S&P 500, and NASDAQ also rallied back from abrupt drops with each closing upby at least 1 percent. With the S&P closing with its best week in 2 years
- Asian stocks followed suit with the Nikkei rising 6 percent and wiping outlosses from the previous session. Both the Hang Seng and Shanghai Composite were able to regain all previous losses.
Contrary to many analyst expectations it would seem that the financial markets have accepted Trump as the next president, which has many wondering why. Post-election market rallies don’t happen often. In fact only in 6 of the last 21 elections have we seen this phenomenon. So, why now?
- Well one reason could be Trump’s pro-business policies including reduced regulation and cutting corporate taxes
- He’s also promised infrastructure spending which gives confidence to bullish investors
- It’s interesting to see how stocks fared based on his stance on different industries – oil and pharmaceutical companies did well, as did banks
- Meanwhile shares in health care, health insurance and renewable energy took a slide, as did tech companies like Apple and Amazon, both of which he’s been critical on.
- The dollar has continued to climb reaching a 9 month high on the expectation that Trump’s policies will drive up inflation
- And a stronger dollar saw gold drop to the 5-month low before bouncing back up to $1229.
So, is the market rollercoaster over? Possibly not as currently the markets are responding to campaign promises and rhetoric. The long-term effect on business won’t be known until January 20th when Trump steps into the White House.
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