After news of a Trump victory spread late last night, S&P 500 futures plummeted 5% and triggered their down limit circuit breaker. This morning, investors are left scrambling to react.
The election result was a shock to most worldwide. British advertising magnate Sir Martin Sorrell called Trump’s win “effectively a second Brexit.” But it’s not all doom and gloom:
“Increased levels of uncertainty will mean more hesitation to make important decisions in the short term, both by people and governments. But it may accelerate implementation of helpful reforms in the medium term to reduce uncertainty and stimulate investment as a result,” said Sorrell via an email statement.
What does Trump mean for the financial markets? Truth be told, no one has any clue. From Bloomberg:
“It’s really tough to tell with Trump,” said Justin Schardin, a financial policy expert at the Bipartisan Policy Center. “There’s no indication that financial regulation is a high-profile issue for him.”
Finance giants may also need to rethink their strategies:
Not knowing costs money. Bank business models may need to be revamped if big changes are made, and whenever a dramatic revamp is brewing, the firms spend a lot on legal advice and lobbying.
Only one thing is for sure right now: the markets, the companies that trade on them, and the money managers that largely control them, were woefully unprepared for this development.
“No one is prepared for a Trump presidency,” said Tony Fratto, a former assistant Treasury secretary in President George W. Bush’s administration who now works for banking clients as a partner at Hamilton Place Strategies. More pointedly, he added that Trump’s presidency will bring so many problems that a question like “Who is named SEC chair?” doesn’t matter as much.
Investors can certainly expect increased levels of volatility in the near term, and probably some serious sector rotation through the end of the year. The details of those moves are still unclear, however.
Buckle up, because it’s going to be an interesting four years.
The SPDR S&P 500 ETF Trust (NYSE:SPY) fell $4.81 (-2.25%) to $209.30 per share in premarket trading Wednesday. Prior to the election results, the largest ETF tracking the benchmark S&P 500 index had gained 5.02% year-to-date.