Markets rose on lower volume with the S&P 500 rallying up to its 50-day moving average before finding resistance. Markets had priced in a Clinton victory, but, just as with Brexit, they started to become aware that odds were shifting to a Trump victory. S&P futures at their worst levels locked limit down at -5%. After Trump was declared the winner, futures came off their worst levels. Markets are now trading up from yesterday's closing prices.
One price victor has been the biotechnology sector as drug pricing will be less of an issue. Investors had priced in expectations for price controls as the majority of pre-election polls pointed to a Clinton victory
The Trump and Brexit LEAVE outcomes suggest the majority wish to reduce the level of power and control the establishment has over its citizens. The fact that a number of Trump-type political candidates have amassed big followings in other countries underscores this phenomenon.
We now have a Republic president and a Republican Senate and House of Representatives. The US has not had a lack of political gridlock in a long time.
Ultimately, a number of Trump's policies are pro-business such as the reduction on corporate taxes from 35% to 15%. Yet futures were down as much as 5% overnight. When Brexit showed REMAIN favored LEAVE by 4% yet the market was shocked to learn LEAVE beat REMAIN by 4%, markets gapped lower at the open. After two sharply down days, the market turned around and sharply rallied to new highs over the next few weeks. Of course, the long term trend has been down for the UK and Europe since the global economy remains unwell.
After the Trump victory, CME FedWatch is pricing in a 68% chance of a rate hike next month, compared to levels around 70% on Tuesday. This still suggests a rate hike is likely in December.