The world’s investors were panicked by Trump win, but US sharemarket recovers

Global markets experienced no shortage of excitement in the lead up to the 2016 US election, but now that President-elect Donald Trump has declared victory, some shares are spiking in anticipation of his policies, while analysts and fund managers say nobody can predict the long term implications of his presidency.

In Australia, the ASX200 is up 3.01% at the time of publishing, but with plenty of details to work out, analysts are concerned about sustained weakness in some market sectors given Trump’s opposition to the Trans Pacific Partnership (TPP). As AMP chief economist Shane Oliver pointed out overnight, exports make up 21% of Australia’s gross domestic product, while only 13% of the US’s, and Australian companies are vulnerable to the incoming President’s protectionist trade policies.

Across the rest of the globe, shares and commodities have been bouncy as everyone scrambles to find the winners and losers from yesterday’s vote, and the corresponding effect on business sectors. Here’s a quick overview of each region over the past two days, and the areas traders are watching.

The US market

The US markets have been downward spiralling since October and in the week’s lead up to the election, the Nasdaq and S&P500 had nine consecutive days of losses, while the Dow Jones Industrial Average has spent the last week cringing in anticipation of Tuesday’s vote. However, as Bloomberg points out this morning, a serious bounceback happened when the market opened this morning – the biggest recovery since the emergence of the Global Financial crisis, analysts believe. The S&P500 Index futures essentially erased the 5% loss that the Trump victory caused.

Banks, construction and equipment manufacturers and health-care stocks rallied on Wednesday in anticipation of growth off the back of policies outlined during the campaign, including the abolition of the Obamacare health policy, big infrastructure spending and low corporate tax rates. For instance, Morgan Stanley compiled a basket of stocks it believed were most likely to gain from a Trump win, including Alexion Pharmaceuticals, which gained 6.4% in trade overnight.

Some analysts are going through stock by stock, with confidence at several US companies affected by different parts of Trump’s values set. For instance, some are predicting sustained losses by gun companies because his belief that gun laws should not be tightened will not cause a rush to buy arms that would have been prompted if Hillary Clinton had won the election.

At the close of trade on Wednesday, the Dow Jones was up 1.4% and the Nasdaq and S&P500 were both up 1.1%.

“The [proposed] cut in the company tax rate will bolster the US equity market and generate a repatriation of US profits back into the US economy,” a CommSec predicted yesterday.

European markets also finished up overnight, with construction and health stocks the winners.

However, analysts in both regions this morning are expressing worry over the impact of a Trump presidency’s approach to spending money at a time when the US has $US19 trillion in debt.

Asia

As the Asian region watched election day play out, traders sold off heavily, with the Japan’s Nikkei finishing down 5%. Meanwhile, India lost 2% and Hong Kong also lost 2%. At the time of publishing, the Hang Seng is down 1.98%, and the only market to avoid major dips throughout the last two days is China, where the Shanghai Composite Index lost 0.6% on election day. However, some analysts have made references to Chinese state-owned financial institutions potentially acting to curb the volatility.

Major concerns for the Asian region include the idea of a “Trade War”, with the other Pacific nations that signed onto the TPP concerned about that decision curbing growth. “The smaller countries could be thinking: “If the US isn’t interested in me, whose horse should I hitch my wagon to?'” Kim Iskyan, who runs Singapore research firm Truewealth, suggested to Barron’s Asia.

Australia

The local market saw $29 billion of shares sold off yesterday, but the plunge might feel like a distant memory to investors now, with the miners helping the ASX200 to 3% of gains in the first hour of trade this morning.

When the market opened at 10:15am, shares jumped 3.03%, and by 10:30am Fortescue Metals Group had gained 12%, while fellow miner Rio Tinto gained 9%. Analysts are putting the those immediate gains down to a rush of confidence about infrastructure spending in the US.

There’s been a bit of a swap in the strength of miners this morning; local gold stocks saw boosts yesterday, but have cooled off since the market opened.

Overall, analysts remain cautious about the long term effects on business and market confidence in Australia, however, with many still in disbelief about the reality of a Trump win.

Hunter Hall fund manager Peter Hall explained in a Livewire Markets webcast yesterday exactly why he was so cautious, referencing Trump’s political inexperience and the lack of concern he has show in the past for repaying debts.

“All of the pieces have been thrown up in the air,” Hall said.