When Donald Trump became president-elect of the United States on November 8, 2016, the S&P 500 initially plunged 5% overnight, but by the time the US markets opened on November 9, 2016, the S&P 500 recouped nearly all of its losses. In fact, all major market indices (S&P 500, Nasdaq, and Dow) closed solidly up around 1% on the day. And in the weeks following, the bulls have been in full control – even able to take Wall Street to record highs. Remarkably, the Dow itself has etched 14 all-time highs since election day. So why were the markets initially shaken yet almost immediately able to recover so strongly? Has this Trump Rally been too much, too fast?
The knee-jerk reaction to Donald Trump’s surprise victory was negative across all markets, seemingly because of the inherent uncertainties involved with his impending presidency. For the most part, markets were positioned for a Hillary Clinton victory on election day, and when that didn’t happen, the overnight sell-off in global markets began. But by the time Trump was wrapping-up his victory speech, markets were already making their move into the green. With even more time to digest the news in the days and weeks following, it’s clear market sentiment is still in Trump’s favor. His pro-business economic policies are being viewed as an overall positive for the markets, characterized by increased government spending, tax cuts, and looser financial regulations that should inflate the bottom line at major corporations.
Over the past 30 days, there has been a stratospheric rise in equities – when will it end? What type of impact will the FOMC meeting have on December 14, 2016? Will the Trump Rally continue into 2017 and beyond, or are the markets in for a substantial decline in the near future? We can speculate all we want, but only time will tell.
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