Worldwide stock markets initially fell by 5% overnight as a reaction to the presidential election – however they rebounded throughout the night and this morning
We expect continued stock market volatility over the next few months as the new economic policies take shape
Presidential politics seldom have significant long-term impacts on the U.S. stock market
The result of the presidential election was a surprise to the financial markets, and they reacted with a lot of volatility. The initial reaction from worldwide markets, and the S&P futures market, was a drop of 5%. However, markets rebounded throughout the night, and the S&P 500 is currently up by about 1% from yesterday’s close. The initial decline was caused by concern about potential budget deficits, potential growth rates, and simply general uncertainty. However, that decline was an overreaction – consistent with other overreactions we’ve pointed out in previous commentaries, such as China’s growth rates in August of last year, low energy prices in January, and Brexit in June.
Obviously, it’s difficult to predict the precise impact that a Trump presidency will have on the overall economy. Many economists and analysts have concerns, but those worries are also mitigated by the fact that many of his economic positions have been vague, and frequently campaign promises are diminished or taken off the table completely as advisors and Congress provide their input.
What we do see is a lot of uncertainty over the next six to nine months as the new economic policies take shape. We should expect continued wide swings in stock values – both positive and negative – over the next few months. However, for long-term investors, those movements are largely inconsequential. As we’ve stated before, seldom do presidential politics have significant effect on the stock market --the American economy has shown its resilience over the last century, and we believe it will continue to do so. As always, we’ll continue to monitor our clients’ portfolios to make sure they’re appropriately invested.