June 23, 2021

Donald Trump’s shocking victory is defying all of the doomsday markets predictions that preceded it

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gettyimages-621962866n From Business Insider

Before Tuesday’s US presidential election, there were many dire warnings about the stock market’s reaction to a President Donald Trump.

Analysts and economists expected markets to fall. Justin Wolfers at the Brookings Institutionmodeled a 10-15% declinefor the market in the event of a Trump win. Jonathan Golub at RBC Capital Markets expected a 10-12% drop for equities.

On Tuesday night, this seemed to be falling into place. As the markets digested the ever-increasing odds of a Trump victory, stock futures collapsed, gold soared, and the market was in turmoil.

On Wednesday, however, all of those overnight losses were erased and stocks soared. In fact, in early trading on Thursday, the Dow Jones industrial average broke through an all-time high, and everything appeared right in the world.

So what happened?

Here are a few reasons we’ve heard:

  • Markets now know who the president is. This may seem too simplistic, but markets really hate uncertainty. Not knowing who the next president would be made investors and businesses nervous, but now that the picture is clear, everyone can get on with their buying.
  • Trump’s fiscal stimulus package will lead to increased business activity. Trump’s campaign proposed a $1 trillion package of public and private investment, which would be even larger than President Barack Obama’s bailout package during the financial crisis. Ideally, this would lead to increased business investment and economic activity and growth.
  • Trump will roll back regulation on banks and other businesses. Trump has said that he would do away with regulations on business, including the Dodd-Frank Act, which put controls on financial institutions. It’s no surprise that the financial sector has been one of the best-performing sectors in the past few days.
  • Investors really like tax reform. Trump wants to lower taxeson companies and investors, which has been a favorite proposal of Wall Street’s for some time.
  • Stocks usually go up. There wasn’t a collapse of the democracy, or someone disputing the results, or a violent transfer of power. If markets can get through World War II, it’s likely that they will continue their 100-plus-year trend of going up and to the right.

This doesn’t mean everything is peaches and cream for stocks. Healthcare services stocks have been getting slammed since Tuesday with the possibility that the Affordable Care Act will be repealed. Tech stocks are getting rocked as well, with the tech-heavy Nasdaq down nearly 2% on Thursday, and large players such as Facebook and Alphabet lagging.

Of note, many economists have identified a possible increase in inflation, difficulty with trade, and a booming federal deficit as issues with Trump’s proposals.

So far, however, it appears the markets are focusing on what they like about President-elect Trump’s platform.

IMAGE: President-elect Donald Trump. Mark Wilson/Getty Images

For more on this story go to: http://www.businessinsider.com/donald-trump-election-victory-defying-doomsday-predictions-2016-11?utm_source=feedburner&amp%3Butm_medium=referral&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

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