Looking at US markets this morning, you wouldn’t know that America had just elected a man without any experience in public office or the military, who voters were told over and over again was supremely unqualified to be president.
Before US markets opened the reaction was frantic. During Asian trading hours, futures on the S&P 500 plummeted 5%, the most allowed before the exchange triggers a pause in trading. The Dow lost more than 700 points during those hours and the dollar fell more than 3% against the yen. Yet this morning in New York, the S&P 500 and Dow stock indexes both opened slightly higher on Wednesday. At 10 am EST, the US dollar was just 0.5% weaker against the Japanese yen.
So why are traders in the US so sanguine?
It could be that they were calmed by Trump’s acceptance speech at a little before 3am EST. The president-elect spoke in words that were surprisingly humble, gracious, and mollifying; he even thanked Hillary Clinton (though his campaign has since said he won’t rule out prosecuting her over the emails saga). Trump said in his speech that he wanted to avoid conflict, and traders may be hoping his most aggressive policies against immigration and free trade will never happen.
Some bank analysts analysts noted that the Trump win is likely to forestall an interest-rate increase by the Federal Reserve, while the weaker dollar will make US companies more competitive. Both would be encouraging trends for stock prices. Goldman Sachs strategist David Kostin has concluded that there will be “limited fallout” for the S&P 500.
But it could just be that traders don’t know what to do. Throughout the campaign Trump made plenty of sweeping statements about creating more jobs, repealing free-trade deals, increasing infrastructure spending, and reducing immigration. But these policies were all light on detail. Kathleen Brooks of City Index said in a note that it’s possible traders “have no idea how to price in his victory as we have no precedent for someone like Trump.”
There have been a few early winners in the stock market. The share prices of private prison companies GEO Group and Corrections Corporation of America are soaring, and pharmaceutical companies like Pfizer are getting a boost. An early rush by traders for gold as a haven asset has pushed up the price of gold miners. Mexican mining company Fresnillo is one of the biggest gainers in the FTSE 100 index today.