Investors think he's about to win
Global markets reacted as expected to Donald Trump’s rising prospects of winning the presidency—with a big selloff.
The Dow Jones Industrial Average futures were indicating that the market has dropped nearly 650 points in after-hours trading. Futures for the S&P 500, the closely watched index of the U.S. stock market, were down 4% in recent trading. Japan’s Nikkei was down 5% in early trading in Tokyo.
The Mexican peso is also plunging in after hours trading, down nearly 12%, the biggest drop in the Mexican currency since 1995. A number of market commentators have said that the peso has become the best gauge of whether investors think Trump can be president. That is in part because 80% of Mexican exports are to the U.S. And many believe Trump’s pledge to roll back the NAFTA free trade agreement and to build a wall between Mexico and the U.S. could be disastrous for the Mexican economy.
The Mexican currency was trading at 20.45 to the dollar, down 2.13 pesos on Tuesday night. That was the lowest the peso has been since the election started.
The market has generally rallied on news that has been good for Clinton. Stock market observers have said that a Clinton presidency would generally be better for the stock market, as Trump is considered to be less predictable. Investors generally don’t like uncertainty. On Tuesday, the large hedge fund Bridgewater Associates predicted the stock market would fall just over 10% if Trump were to win the election.