Donald Trump’s victory in the US presidential election was expected to spook investors after a campaign defined by divisive, protectionist rhetoric.
Yet on the second day after his election Wall Street investors were in a bullish mood, with the Dow Jones industrial average hitting a record high. The Dow rose as much as 191 points to reach 18,780 by 1pm in New York, while the other two main US stock market indexes, the S&P 500 and Nasdaq, also climbed.
Conner Campbell at financial betting firm SpreadEx said: “Before [Wednesday] morning Trump was toxic yet now … he is the biggest turn-on the market has seen in months.”
In the days before the vote, share indexes rose when it looked like Hillary Clinton was winning and fell at a hint that Trump could catch her.
On 7 November, the day before the election, the Dow had its best day for eight months after the FBI cleared Clinton over her private email server. And on Wednesday markets duly plunged in early trading as Asian and European investors responded to the shock result.
But by the time Wall Street opened for business Trump had made a conciliatory acceptance speech in which he promised to heal divisions and work with other countries. After a volatile opening as investors tried to make sense of events, the Dow rose on the day.
Shares rose partly on relief at Trump’s tone and the lack of references to erecting trade barriers or a wall across the Mexican border. Trump also rowed back on threats to sack Janet Yellen, who chairs the Federal Reserve central bank.
Traders then looked for opportunities. If Trump was going to be more sensible than his campaign pronouncements implied, then what about his policies? Trump has pledged to cut corporation tax, a move all businesses would like.
He has promised to cut back regulation and scrap climate change targets, including abandoning the Paris agreement to reduce emissions. Oil and gas shares duly rose.
Speculation that the Republicans could ease rules on banks, including scrapping the Dodd-Frank regulations introduced after the 2008 financial crisis to curb risky behaviour, sent bank shares soaring.
In his victory speech, Trump talked about putting Americans to work to overhaul the country’s creaking infrastructure. These promises sent shares of mining and construction companies up.
Drug companies also rose. Both Trump and Clinton talked about reining in charges for treatments but Clinton was more aggressive and specific.
Tom Elliott, an analyst at financial advisers deVere, said a Trump presidency had created opportunities for investors but that they should prepare for a bumpy ride.
“Trump’s plans could well increase overall demand in the economy, boost growth and corporate earnings in the near term but result in inflation further down the line. A typical boom and bust scenario may follow.”
