Election Win by Donald Trump Sends Stocks Surprisingly Higher
If you listened to the economists on Wall Street, a victory for Donald Trump would result in bloodbath on Wall Street. Citibank predicted that a Trump win would send equities lower by three to five percent. PBC News Hour forecasted a 10% drop on Wall Street if Trump won.
To the surprise of many, none of that happened.
Overseas, equities tanked for a short period of time after it was announced that Donald Trump became the president-elect. At one point, the Dow Jones Industrial average was down more than 800 points. To put that into perspective, the Dow Jones fell 684 points after the events of 9/11.
Once the markets opened in North America on Wednesday, November 9 though, all fears had disappeared, and the Dow Jones Industrial Average soared, hitting a new intra-day high of 18.650.06. On Friday, the Dow Jones closed at a record high of 18,847.66.
In the three days following the election, the Dow Jones Industrial Average had advanced nearly three percent.
Winners and Losers under a Trump Presidency
There have been some clear winners and losers since Trump unexpectedly won the race to the White House. Trump’s tough stance on crime and immigration sent corrections and detentions stocks higher; in particular, Corrections Corp. of America (NYSE/CXW) was up more than 60% in intraday trading on November 9. The company continues to hold on to recent gains.
Defence stocks have also done well following the U.S. presidential election. Lockheed Martin Corporation (NYSE/LMT) stock has soared approximately 13% since the election and is trading at an all-time high near $268.00. Over the same time frame, Northrop Grumman Corporation’s (NYSE/NOC) share price has climbed more than 10%.
Healthcare stocks have also done well since Trump was elected now that significant parts of the Affordable Care Act (Obama Care) are expected to be replaced. Some of the biggest winners so far are Pfizer Inc. (NYSE/PFE) and even Bristol-Myers Squibb Company (NYSE/BMY) enjoying a bump. The iShares NASDAQ Biotechnology ETF (Nasdaq/IBB), the biggest biotech ETF in the world, is up more than 12%.
At the same time, there are some stocks and sectors that have not performed well since Trump won the U.S. election. Energy stocks, in particular, solar stocks took a hit as it is expected a Trump administration will favour coal and repeal policies that encouraged investing in renewable energy…like solar.
Trump’s promise to pump $500.0 billion into infrastructure spending has put a spot light U.S. growth and inflation, which leads investors to favour stocks over bonds. This sends bond prices lower and the yield higher. Rising rates are hurting defensive plays like utilities and consumer staples.
Uncertainty Remains around Donald Trump Presidency
How long will the Dow Jones Industrial honeymoon last? Just because the markets are bullish doesn’t mean the Dow Jones will continue to climb into uncharted territory day after day. And when will down trodden stocks rebound?
Donald Trump has pledged to rip up or renegotiate international trade agreements like NAFTA and TPP. Either move could stall U.S. and already fragile global growth. Donald Trump’s call for major tax cuts are also expected to increase the already ballooning U.S. deficit.
Donald Trump doesn’t become president of the U.S. until January 20. A lot can happen over the next two months. And a lot will happen to the markets after he takes office.
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