Though S&P 500 and Nasdaq futures fell 5% overnight, U.S. markets managed to recoup those losses and even post gains in early Wednesday trading. Dow Jones futures plummeted by over 800 points Tuesday night, but the Dow Jones Industrial Average was up by about 1% by noon Eastern Time Wednesday. Japan’s Nikkei 225 was down 5% after a slide on Wednesday morning, but the Shanghai Composite, which fell as much as 1.3% in early trading, largely reversed those losses.
Perhaps more telling were movements in bond markets: Treasury yields were much higher as of midday, as investors anticipated that Trump’s plans for tax cuts and infrastructure spending would widen U.S. deficits and drive up interest rates.
As for what comes next, no one can be even remotely sure. The presidential seat will be the first political position Trump has ever held, and already the president-elect has promised many policies challenging the status quo. He has threatened to impose much higher tariffs on imports from Mexico and China, alongside other rhetoric that threatens globalization.
Here’s what analysts in the financial world have to say:
Citi‘s group of analysts, led by Tina Fordham, commented on the surprise Republican capture of the White House and its retention of majorities in the Senate and House. The team noted that Trump’s tenure in the White House will likely be marked by uncertainty, and could put the expected December Federal Reserve interest rate hike on hold. The Citi team wrote:
Evercore ISI‘s Terry Haines noted that while the Senate, House, and White House are now united under the Republican party, the divide between Trump and his party still exists. That suggests that the uncertainty Trump might bring to the presidency will be tamped down by Congress—meaning less volatility for global markets.
Cowen‘s Chris Krueger though noted that the “smashing win” will result in a cabinet that reinforce’s Trump’s campaign behavior in a analysis bracketed by lyrics from Lynyrd Skynyrd’s “Tuesday’s Gone.” Now investors must wait to see who will be in Trump’s cabinet.
“Trump sworn-in as President on January 20 with a GOP House and Senate. Budget reconciliation rules mean passage of tax/ health care/deficit bills with simple majority. Trump unilateral power on tariffs,” Krueger wrote. Over the next 100 days, he added that investors should watch out for these scenarios: “Democratic Party meltdown/ circular firing squad; Tea Party/Trump coup against Paul Ryan (Sean Hannity stated last night he should not be Speaker); President Obama reaction, Lame Duck – literally zero chance for Judge Garland, TPP, or anything else of meaning; Trump Cabinet announcements (Trade posts will be key to watch); Trump dialogue with House and Senate GOP leaders (this is also critical – and is the anchor on the Bull Trump Case).”
PNC Asset Management‘s Chief Investment Strategist Bill Stone added that the market’s dip is no surprise. Historically, markets have fallen after election day before providing long term gains. Stone said in a statement:
He added in a note that historically, this quarter (the fourth quarter or the fourth year in a presidential cycle), results in a relief rally that shows the highest quarterly performance compared to any other quarter. But investors should expect market lows in the next quarter, as markets try to assess a new political atmosphere, and how it’ll affect the economy.
Goldman Sachs’ U.S. Chief Equity Strategist David Kostin opined that Trump’s win would have little effect on the S&P 500.
TD Ameritrade Executive Vice President Steven Quirk told Fortune that markets seemed to have overreacted to the surprise win, at least initially.
“If you look at the initial moves, its quite similar to what happened in Brexit and other major events,” Quirk noted. “The major difference in Brexit and this event is there will be continued volatility is what will happen to their investments.” Quirk also noted that with or without Trump, the economy should be heading into a slowdown. “We are in the eight year of a bull market. And people understand that it doesn’t last. But I wouldn’t expect monstrous gains in the next year or two. If it does go up it will be a grind.”
A team of Fitch Ratings analysts and directors noted that while Trump’s win would have no effect on the U.S.’s current AAA credit rating, his proposed policies would hurt the country’s rating in the medium-term. The team wrote:
CFRA Research, formerly S&P Market Intelligence, noted that the Republican sweep is a negative for the U.S. solar industry. CFRA equity analyst Angelo Zino wrote in a Wednesday note:
Mizuho’s U.S. Chief Economist Steven Ricchiuto also weighed in:
Other financial-world forecaster have warned that a Trump win could result in massive losses on the stock market. St. Louis-based Macroeconomic Advisers projected in an October note that a Trump win could wipe $2 trillion off stock market.