Step into my DeLorean for an Election Edition Ride
November 14, 2016
As we look at a historic week on the political front I decided to look back at The Weekly written after the last Presidential election. So step into our DeLorean time machine as we take a quick trip back to our Weekly of November 12th 2012.
That Weekly spoke to the election of President Obama for a second term. Obama had been clearly ahead in all the polls and no one thought the Republican stood a chance (sounds familiar). On the Monday and Tuesday before the 2012 election the market traded up, but immediately following the results the market sold off, closing the week down 2.1%. The main excuses given for the sell off were the possibility of rising taxes, the possibility of a downgrading by the rating agencies of US Government debt, and the still ongoing problems in Greece.
But of course one week does not a market make. The DJIA closed the Friday following the 2012 election at 12,815 only to see it close this past Friday at 18,847 – an increase of 47% . The S&P 500 did even better and has risen 58% over the same period. A bad first week turned out to be a pretty good four year run for investors.
This week was very different. Going into the election everyone seemed to feel the Democrats had this one in the bag. The market had already begun to conclude that, once elected, Clinton would move reassuringly back to the center. There was an even stronger view that if, Trump were to win, a massive sell off would occur as his policies on trade would hurt the US economy. As Tuesday night bled into Wednesday morning, and results were released, the unbelievable became reality. At 2:32am the AP announced that Trump had won. By 2:33am the futures markets were predicting that the US market would open on Wednesday down 700 points! I went to bed to get some sleep before the expected market carnage.
I came in to work ready for volatility, but instead witnessed an amazing event. The market turned on a dime. It went from massively down to massively up. By the close of the market on day one of the new world order, the DJIA had gone from down 700 points to close the day to up by 257 points – an almost 1,000 point swing. By week’s end another 258 points had been added to the upside, and the market was up 5 percent for the week.
In November 2012 we questioned if the market was hitting a reset button or a pause button. It turned out to be the pause button. This week it appears that from a political point of view a reset button has been hit and so far the markets like what they see.
Carl Gambrell
