The historic US election shocked investors around the world; plummeting the stock markets and affecting the foreign exchange markets. Prior to the US election, investors were expecting Hillary Clinton to win. A candidate who is more predictable, and would have less impact on global trade. Two days before the election, the Dow surged 400 points, since investors were betting that her chances of winning improved after the FBI cleared her ongoing email investigation.
Such a beautiful and important evening! The forgotten man and woman will never be forgotten again. We will all come together as never before
— Donald J. Trump (@realDonaldTrump) November 9, 2016
The Dow Futures are down 400 points (a recovery from falling 800 points before). Trump’s uncertainty is leading global investors to sell off their stocks. Japan’s Nikkei collapsed by 5.4% and Hong Kong’s hang Seng also plummeted by 2.2%.
Global Stocks are expected to have a rough open after the US election, which has sent shockwaves throughout the stock markets. Comparatively, this is similar to the effects of Brexit; where many investors believed that it wouldn’t actually happen. The results of the Brexit going through sent caused a huge turmoil in the markets, and the Great British Pound (GBP) had a historic drop.
After the Brexit, the Dow fell more than 600 points, and GBP declined 9% – the biggest drop since 1985. Stock markets continued to plummet a few trading days after the Brexit – a similar thing expected to happen to the Global Stocks over the next few days.
In the case of the US election, Trump’s victory resulted the Mexican peso to lose more than 11% of its value, an all time low. Trump is known to be anti-Mexico – and has discussed about renegotiating or ending the North American Free Trade Agreement (NAFTA). The Canadian dollar has also been impacted by the results, declining more than 1%, to 0.74 USD.
Wall Street does not favour Donald Trump because he causes uncertainty in the markets, and promotes anti-trade policies. His plan of negotiating the NAFTA would have a huge impact on many publicly traded companies that are involved in the NAFTA deal.
Hedge fund company, Bridgewater Associates predicted that the Dow would drop more than 2,000 points in one day if Donald Trump wins, which is more than double than the 777 point plunge that occurred on October 28th, 2008.
If this drop were to happen, the stock markets would be in an immediate correction territory. As of now, the Dow futures are down 400 points. The markets are poised for a rough opening, due to uncertainty from Trump’s economic policies. Will there be 2008-style stock market crash as a result of Trump’s victory?
Other commodities have declined, such as crude oil plummeting near 4%. In the meantime, many investors are rushing over to ‘safer’ assets – gold has surged 2%, and some say the Trump victory can lead gold to soar by up to 10%, an inverse relationship between gold and stocks that is apparent in times of financial stress.
Writer: Jelani Smith
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.