Wednesday, November 9, 2016

Markets soar following early losses after Trump's victory was announced

Dow surged 256 (off the highs), advancers over decliners a modest 5-4 & NAZ gained 57.  The MLP index shot up a massive 8+ to the 296s & the REIT index remained 5+ lower in the 325s.  Junk bond funds remained weak & Treasuries tumbled badly, taking the yield on the 10 year Treasury to 2.07% (last seen at the start of 2016).  Oil finished higher in the 45s & gold was flattish (more on both below).

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A Trump victory had been portrayed by analysts as having the potential to unhinge markets banking on a continuation of policies that coincided with the 2nd-longest bull market in S&P 500 history.  Most polls had shown Hillary was ahead.  Trump has pledged to clamp down on immigration & renegotiate free-trade agreements.  In his victory speech, he pledged to focus on rebuilding US infrastructure.  

U.S. Stocks Rise, Treasuries Fall as Trump Win Spurs Growth Bets

The leadership, powers & policies of the Federal Reserve may look very different in 18 months.  Trump can't remove Fed Chair Janet Yellen from office before her 4-year term expires.  By mid-2018, however, Trump can replace the Fed's top personnel & potentially alter monetary & regulatory policies.  Some members of Congress may also take aim at the Fed's independence from political influence.  Still, discussion of potential remakes come with one massive caveat.  No Fed watchers seemed confident in predicting even what kind of nominees Trump is likely to put up for the Fed, nor what kind of regulatory approach he is likely to favor.  During his campaign, Trump railed against the 2010 Dodd-Frank Act, which greatly increased restrictions on banks operating in the US, but also said he would reinstate a separation between bank lending & securities underwriting.  Changes at the Fed can start with 2 vacancies on the Board of Governors in DC, whose 7 seats, when all filled, form a majority & center of influence on the policy-making FMOC.  Trump is likely to name one of his new picks to the also-vacant post of vice chair for supervision, a job created by Dodd-Frank.

Fed Faces Overhaul as Washington Braces for Trump-Led Shakeup

Oil prices rose as US financial markets bounced back from an early Brexit-like slide following Donald Trump's surprise victory.  Crude had tumbled as much as 4% early in the session, in the immediate aftermath of the presidential election results (near $43, a near 2-month low).  The selloff was part of a broad-based market reaction where investors fled risky assets such as stocks & the $, which have since turned positive as well.  With a Trump victory, some analysts predict there were supportive factors for oil prices such as a potential shift in US policy toward Iran.  Trump has criticised the nuclear deal with Iran, an accord that has allowed it to increase crude exports sharply this year.  Iran said Trump should stay committed to the deal.  The Obama administration said it will remain committed to the Iran deal thru its final months. 

Oil Reounds After Shock Trump Victory for U.S. Presidency

Gold futures reversed course late in today to settle lower as equities climbed & the $ strengthened in the wake of Trump's victory.  The risk-on sentiment among investors drew interest away from the precious metal.  Dec gold settled at $1273 an ounce, down $1 (0.1%).  Prices had climbed by as much as 5% overnight as the elections results rolled in.      

Gold Prices Settle Lower After Trump's Election Win Feeds a Volatile Session

The highly volatile gyrations can not be taken seriously.  Large price swings are anticipated for the rest of the week.  The transition of power has been started already after Obama's speech.  It should be smooth no matter what the zealots think.  There is a lot to think about on changes coming to the business world.  Among other thoughts is that the Fed's path to a rate hike has been clouded by Trump's victory.

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