So much for the “panic” that was supposed to engulf the stock market after Donald Trump’s surprising victory in the 2016 presidential race. On Wednesday, just a few hours after Hillary Clinton finally offered her public concession, the Dow Jones Industrial Average closed with an all-time high.
There was market turbulence on Election Eve, to be sure. As midnight approached on Tuesday, Dow futures dropped almost 900 points, S&P 500 futures were down over 97 points, and the U.S. dollar slumped by 3 percent.
It seems clear now that much of this alleged market panic was merely the market adjusting to surprising news — it seems safe to say that not many people in New York City or Washington D.C. saw Trump’s late-night surge at the ballot box coming. Also, there was probably some apprehension that the election might not be settled on Tuesday night, with visions of dangling chads from 2000 dancing in the heads of traders.
By Wednesday afternoon, CNN Money reported that “U.S. stocks welcomed President-elect Donald Trump by avoiding the crash many had feared.” The Dow jumped 200 points after Clinton officially conceded, then packed on another 300 points in short order. Gold prices, widely seen as a metric of investor anxiety, went up by 3 percent overnight but then settled back down to a modest 0.7 percent gain by Wednesday afternoon.
“The S&P 500 and Nasdaq also erased early losses and were recently enjoying gains of more than 1%,” CNN Money added, concluding the net result was “hardly the freakout many anticipated.”
Analysts were quoted saying that Trump’s statesmanlike victory speech was a factor in restoring market confidence and dispelling fears that excessively “protectionist” measures would be swiftly imposed. Others noted how fears of a post-Brexit market crash proved to be greatly overblown.
CNN Money cites some political effects on the market, including a Wall Street buying spree for biotech and prison stocks, which had lost considerable value because Clinton vowed to attack those industries. Now that Trump will be the next president, his promise to roll back Dodd-Frank regulations have boosted banking stocks — at least until investors figure out if Trump will follow through on plans to break up the big banks.
Defense stocks are also doing well in anticipation of increased military spending, while the construction industry rallied at the prospect of increased infrastructure spending, while hospital stocks dropped because ObamaCare may well be repealed.
The Washington Examiner notes that 10-year U.S. Treasury securities crashed overnight but then recovered on Wednesday to the highest levels since January.
Another interesting market quirk: gun manufacturing stocks were down because the industry had been anticipating a surge in demand due to the election of gun-control enthusiast Clinton.
“We think the stock market will settle down and decide that it likes Trump,” the Examiner quotes MUFG Union Bank chief economist Chris Rupkey predicting.
Also quoted was Trump endorser Carl Icahn, who slipped out of Trump’s victory party in New York City to buy stocks during the market panic because he knew there would be bargains aplenty.
“I think Donald’s a real smart guy. I’ve known him for years and I think he’s going to do things for this market,” said Icahn.
“The market’s initial response to the probability of a Trump win was, predictably enough, one of shock and fear as the prices of traditionally risky assets tumbled and perceived safe havens rose. However the increased prospect of tax cuts and a generally pro-growth set of policies from him, aided and abetted by the Republican clean sweep of congress, has seen some of this initial reaction begin to reverse,” said Aberdeen Asset Management fund manager James Athey, quoted by CNBC.