Brexit wins. The Chicago Cubs win. Donald Trump wins. Which of those statements is the most surprising?
The Presidential Election is over. Reminiscent of Brexit, the polls showed a Clinton victory as inevitable but the electorate had something different in mind. As of this writing, Hillary Clinton narrowly led the popular vote, but Donald Trump won the electoral college votes, including those from many of the significant swing states such as Florida, Pennsylvania, North Carolina, and Ohio.
For much of the period leading into Election Day, the stock and bond markets took the election in stride. Stocks traded in a tight range until October 24, when the S&P 500 posted nine consecutive down days. We pointed out in our pre-Election commentary and webinar that stock market performance in the three months leading into the election has been a strong predictor of the result. When stock market performance has been negative, the incumbent party has lost seven of eight elections since 1928, or 87.5 percent of the time. Now make that eight of nine elections: from August 8 through November 8, the S&P 500 declined 1.9 percent. Once again, the stock market was an accurate predictor of the election outcome.
OBSERVATIONS ON THE RESULTS
In addition to winning the White House, Republicans retained the Senate and House of Representatives, albeit with narrower margins. This election has been unique and Mr. Trump at times ran against his Republican brethren. It will be interesting to see how strongly Mr. Trump benefits from Republican ownership of all three government branches. There was a high level of anxiety from investors leading up to the election. Now that it is behind us, there will be a new set of investment opportunities and risks to digest. The implications of the election are numerous, but here are some things we expect:
THINGS TO WATCH
We will be keeping an eye on many things, most notably:
For months now, we have told our clients that we did not expect the election to have a major and lasting impact on the stock and bond markets. We did not advocate major portfolio changes in anticipation of the election for that reason. It will take several days to fully process the impact of yesterday’s election results, and we think patience is the best course of action currently. We will look to take advantage of any opportunities arising in this market.
If you have any questions or concerns, please contact your client advisor.