One Prediction I'm Glad I Got Wrong
In the wake of Donald Trump's surprising electoral victory there is one prediction I'm glad I got wrong. I had started telling friends a week ago that if Trump won on Tuesday we'd see the financial markets drop by at least 5% on Wednesday.
The reason, I explained, is that financial markets crave predictability. Trump has proven himself to be anything but predictable. Indeed, Big Finance had already shown its preference for Hillary Clinton through its campaign donations to her. Moreover, when FBI Director James Comey's eleventh-hour disclosure of a new investigation against Clinton sent her polling results into a tailspin early last week, US financial markets followed suit, dropping 5%. After Comey cleared her Sunday night, markets recovered 3% Monday and Tuesday. Clearly, it seemed, investors wanted Clinton.
Thus I was not surprised when the financial carnage started late Tuesday night. By the time Clinton telephoned Trump to concede USA Today was already crying, "Global markets in tailspin as Trump victory declared". Japan's Nikkei dropped 5.4%. Futures of the Dow Jones were down 3.4% and S&P 500 futures dropped more the 4%, triggering an automatic trading stop designed to halt market meltdowns.
Amongst friends attending the election evening party at our house the predictions were dire. "5%," I predicted. "To start with." "10%," said someone else. "At least 15," said a third.
US markets did open lower today, though thankfully not by more than a few points. But then something strange happened: they recovered. And not only did they recover, they closed with gains for the day. Dow Jones, +1.4%. S&P 500, +1.1%. NASDAQ, +1.1%.
I'm well away that tomorrow or next week could well bring another reversal- á la #brexit's #brecovery but in the opposite direction. For now though I'm happy to have been wrong in predicting a major market meltdown.
The reason, I explained, is that financial markets crave predictability. Trump has proven himself to be anything but predictable. Indeed, Big Finance had already shown its preference for Hillary Clinton through its campaign donations to her. Moreover, when FBI Director James Comey's eleventh-hour disclosure of a new investigation against Clinton sent her polling results into a tailspin early last week, US financial markets followed suit, dropping 5%. After Comey cleared her Sunday night, markets recovered 3% Monday and Tuesday. Clearly, it seemed, investors wanted Clinton.
Thus I was not surprised when the financial carnage started late Tuesday night. By the time Clinton telephoned Trump to concede USA Today was already crying, "Global markets in tailspin as Trump victory declared". Japan's Nikkei dropped 5.4%. Futures of the Dow Jones were down 3.4% and S&P 500 futures dropped more the 4%, triggering an automatic trading stop designed to halt market meltdowns.
Amongst friends attending the election evening party at our house the predictions were dire. "5%," I predicted. "To start with." "10%," said someone else. "At least 15," said a third.
US markets did open lower today, though thankfully not by more than a few points. But then something strange happened: they recovered. And not only did they recover, they closed with gains for the day. Dow Jones, +1.4%. S&P 500, +1.1%. NASDAQ, +1.1%.
I'm well away that tomorrow or next week could well bring another reversal- á la #brexit's #brecovery but in the opposite direction. For now though I'm happy to have been wrong in predicting a major market meltdown.