MARKET REACTION TO THE TRUMP VICTORY

The week of November 7, 2016 will rank as one of the most unexpected in the stock market. Until the evening of November 8, most pundits predicted an 80% chance that Hillary Clinton would win the presidency. When the true outcome began to be evident, investors panicked. Futures on the S&P 500 index plunged by the 5% limit that triggers trading curbs, [and Asian shares sank by the most since the aftermath of Brexit. Mexico’s peso fell more than it had it in two decades, and gold jumped along with the Yan and US treasuries.

After few hours, the traders realized that trumps pro-business policies would likely lead to only good news for the stock market. “The Republican sweep across Washington should pave the way for tax reform at both the individual and corporate level. America’s largest multinational companies will almost assuredly have the opportunity to repatriate some of its foreign cash holdings for a modest penalty,” said Jeremy Klein, chief market strategist at FBN Securities. Election week closed with the three major indexes posting their best weekly gains of the year, and the Dow had its best week since 2011. Notably, construction stocks were up 10%, reflecting trumps announced plans to build infrastructure.

One only has to go back to the early 1980s to see the impact that a seismic shift in the nation’s politics can have on economic prospects. Although the Obama years have been often described as a recovery, it has been a very weak recovery. Obama is the first president to fail to have even one year of 3% GDP increase. Whether or not this will continue, and the impact will be on IPOs and public mergers, has yet to be seen.