Election Results Prompt Strong Market Volatility

Tuesday night’s election coverage had both sides fidgeting for a while, but Donald Trump staged an almost miraculous comeback, winning in state and counties where Democrats thought they had an edge. While liberals were taken by surprise, they weren’t the only ones. Polling experts, who were generally confident in the data showing Clinton with a four-point lead, were stumped at exit polls and data showing the Democratic candidate performing better with minorities and white educated women than anticipated.

Markets, which had already priced in a Clinton victory, quickly scrambled to reposition themselves for a future Trump presidency. At one point, the Dow futures fell 750 points, the S&P 500 futures were down 97.25 points and the NASDAQ fell 220 points, according to MarketWatch. However, equities rallied to almost break even, opening slightly down Wednesday morning.

There was also volatility in currency trading as the Mexican peso tumbled against the US dollar as Hillary Clinton conceded the presidential election to Donald Trump. Mexico’s currency hit a record low early in the evening, but ended up gaining back near 19.88 versus the dollar Wednesday morning.

Aside from Trump, one of the biggest winners of the night were gold futures, which saw one of its heaviest trading days as investors rushed to havens on concerns of a Trump presidency, according to Bloomberg. About 570,000 futures changed hands Wednesday morning in New York, which was triple the full-day average for the year.

Bullion rallied from $1,270 at 8 p.m. to a high of $1338, retaining some gains throughout the night, and dropping just above $1,305 by 8:30 a.m. ET Wednesday morning. However, the yellow metal continued to lose most of the previous day’s gains, finally finding supporting at around $1,272.

Also disrupting markets is the now increased uncertainty the Fed will raise interest rates in December. At one point, traders had put their anticipation for the December Fed funds rate just four basis points above its current rate, which translates to a small probability for a go in December.

“With the violent reaction being seen in financial markets, there’s a good chance that a rate hike from the Federal Reserve is less likely in December,” said Mark Hamrick, Bankrate.com’s senior economic analyst. “The Fed has wanted to move further along the path toward normalization, or higher rates. As the election has demonstrated, we live in times that are anything but predictable.”

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