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Markets calm after frenzied night following Trump win

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As the U.S. financial market calmed after a tumultuous night sparked by Donald Trump’s victory in Tuesday’s presidential election, experts said more time and information would provide a clearer picture of the effect of a political result Wall Street had largely bet against.

“The markets are actually taking this remarkably calmly right now,” said Robert Hartwig, a professor of finance in the University of South Carolina’s Darla Moore School of Business. “You saw a lot of adjusting in the markets before they opened, but today we have a very, very modest move on Wall Street. If you didn’t know there was an election right now, you wouldn’t know anything had happened.”

Hartwig (Photo/Provided)After Dow futures plummeted nearly 900 points at one point Tuesday night, the dollar rose this morning. At noon, the Dow Jones industrial average had risen 20.78 points, or 0.11%. The S&P 500 fell 0.1% and the Nasdaq dropped 0.24%.

Asian stocks, led by Japan’s Nikkei 225’s 5% drop, plunged. The Mexican peso, reacting to tough Trump trade talk, fell 11% at one point to an all-time low against the dollar. European markets fell initially before ending the day with solid gains.

Hartwig said a period of volatility into the first few days of the Trump administration is to be “absolutely expected.” As a variety of factors, including Trump’s cabinet appointees and details of his financial and foreign policies, become more fleshed out, the markets will have more information to go on, he said.

“Nobody operates in isolation in the government. There’s a Cabinet and there’s a Congress,” Hartwig said. “Once these individuals are determined, I think markets will begin to develop a confidence.”

Some market strategists attributed today’s calm to Trump’s victory speech, which sounded a more conciliatory tone than his often bombastic campaign.

“The rhetoric that was talked about on the campaign trail was pretty scary — the nationalism and the protectionism,” Art Hogan, chief market strategist at Wunderlich Securities, told CNNMoney. “But there’s a big difference between what you say campaigning and what you do as president.”

Hartwig echoed those thoughts.

“I think it would be naive to assume that Mr. Trump’s objective is to begin a trade war with China, Japan and Mexico,” he said. “There are few things that economists agree on, but one of them is that free trade benefits the entire planet. ... What is viewed as free and fair trade — I think that standard is about to be shifted.”

Hartwig also highlighted parts of Trump’s speech that focused on investing in government infrastructure.

“Mr. Trump is simultaneously a supply-sider who has a Keynesian streak in him, meaning he believes in the power of government spending,” Hartwig said. “I think what we are seeing there is Mr. Trump, for a living, builds things. There are a lot of things in this country that need building or rebuilding, there’s no question about that.”

Hartwig, who teaches a class at USC on health and life insurance, said there is a “near certainty” that the Affordable Care Act will be repealed and replaced, but that it will be a gradual process. Parts of the plan, such as allowing children to remain on a parent’s plan until age 26, drive down costs and are popular with Republicans and their constituents, and “any effort to repeal or replace it will also require a phasing out,” Hartwig said. “I don’t think that anyone who is literally in the process of enrollment today for the Affordable Care Act in 2017 will have the rug pulled out from underneath them in the middle of next year.

Similarly, while bankers who chafe at the increased regulations of 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act may well see some of the relief Trump has alluded to, any changes to Dodd-Frank won’t be immediate.

“There’s going to be an assessment of what is possible and what is necessary and a triaging of that,” Hartwig said. 

Contact Melinda Waldrop at 803-726-7542.

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