Stocks, Bonds & the Election Heard Around the World

Please note that the following article may contain affiliate links:

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.

Investing topics were the norm for months in blogs all over the internet and in print publications around the world. Columns and blogs giving advice on safe investing could be found at every turn. A Trump victory was predicted to send shockwaves around the global financial markets like a tsunami.

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.

No comments