Stocks, Bonds & the Election Heard Around the World
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Buy or sell the Trump
In the months leading up to the elections, news outlets and
newspapers all over the globe speculated on what a Donald Trump victory would
mean for global markets. It seems that the world was expecting a massive market
crash and a choking recession, or full-blown depression, in its wake.
Imagine the surprise when that didn’t happen.
The Trump bump
Although there was an initial dip in the markets as the news of Trump’s victory flew around the globe, the markets quickly rebounded. When the country with the world’s largest economy elects its leader for the next four years, the world takes notice. There is always an expected period of fear and uncertainty.
However, that period of uncertainty seems to have been very
short-lived. The Dow Jones stock market has reached record highs, posting gains of over 19,000. The
initial reaction to the Trump election was a knee-jerk reaction that
disappeared in the light of the next day. After that initial drop, the markets
reversed their directions in dramatic swings.
The election of Donald Trump has set off market changes that
represent a defining moment for the U.S. economy, much like the Brexit vote.
World markets tend to thrive in environments rife with stability and are
generally resistant to change. The recent moves in the markets that span a
number of asset classes are a testimonial on the resiliency of the United
States itself.
Reactions around the world
The initial reaction of world markets was nothing short of panic when word of Donald Trump’s victory made its way over the globe. But the panic quickly vanished after Mr. Trump’s conciliatory victory speech. He was able to alleviate some investors’ fears and the markets responded accordingly.
European markets initially fell but rallied quickly toward
the end of the trading day. The FTSE 100 was up 0.8 percent while France’s CAC
and Germany’s DAX traded relatively flat. U.S. drug companies posted some nice
gains with Pfizer, the largest drug company in the world, up a full 7 percent.
Construction companies responded to Mr. Trump’s pledge to
build a security wall across the U.S. southern border with Mexico. He’s also
pledged to institute a sweeping program of massive repair, replacement and
improvement of the aging infrastructure across America. Shares in construction
companies saw a strong increase, with construction equipment companies such as
Caterpillar boasting a 7 percent increase.
Banking stocks around the world responded positively on the
speculation that a Trump presidency would see a sharp reduction in bureaucratic
red tape and a relaxing of regulations strangling the banking industry. In the
wake of Brexit, the sterling fell to a 30-year low but was up 0.5 percent
following Trump’s victory.
The downside
The news was not so well received in Mexico. The peso saw a drop of 9.3 percent, which forced the Mexican central bank’s governor and finance minister to address the nation, reassuring the population that the country’s economy was safe.
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