Trump Wins Presidency as GOP Retains Congress; U.S. Markets Shudder, Recover

Japan’s Nikkei index was off 5.3% on Wednesday, Hong Kong’s Hang Seng was off 2.2%, Germany’s DAX was off 1.2% with four hours of trading left but the FTSE 100 was off only 0.5%, also with four hours of trading left in the day, representing a much more tepid decline than was the case when British voters opted to leave the European Union this summer in the Brexit election.

Gold was off 2.3% to $1,303 per ounce while the Mexican peso was off 8.5%; in what had been seen as a continuing harbinger of the election prospects, on Monday the largest U.S. listed Mexican ETF had attracted record inflows.

What accounted for the surprise results, since most polls showed Clinton would defeat Trump? A clue was provided by political analyst Greg Valliere last month. Speaking at the Schwab Impact conference, Valliere predicted a Clinton victory, but provided this caveat about pollsters famously getting election results wrong, including the Brexit vote earlier this year in the U.K. and other foreign and domestic elections. “If you hold a controversial point of view,” like Brexit or are, perhaps, a Trump supporter, you are less likely to tell a “complete stranger who calls you up at 8:00 at night and asks how you’ll vote” on such a sensitive subject if you share what you know are controversial political views. 

In an interview last Friday at Commonwealth Financial Network’s national conference, CIO Brad McMillan positioned the presidential election as the “beginning of the show, not the end,” since the issues raised in the election stem from three major secular trends. The issues that have caused so much controversy in the 2016 campaign, and the splits seen in both major parties, he said, are symptomatic of “the 99%” being unhappy with their lot in life. While Trump’s utterances may be “outside” the policies expressed by both Democrats and Republicans over the past 50 years, they reflect strong feelings among the American public, so Trump is more of a “feature, not a bug.”