Trump: Why did the DOW and the ASX react so differently?
As the entire planet wakes up with a political hangover, one thing has not played out as expected: The US Stock Exchange closed out the day approximately one percent up.
So, where was the crash?
A few months ago, international markets reeled at the result of the United Kingdom’s referendum on whether or not to remain part of the European Union (aka: Brexit).
On 23 June 2016, the shock result to leave the EU resulted in the FTSE100 plunging over 8% and the Pound dropped 11%. While the UK stock exchange has largely recovered, the same can’t be said for its currency.
Meanwhile, in Australia, there was a huge reaction to the election results. Much like the rest of Asia, we were experiencing the count while trading was open. As a result, you can see how the ASX responded to the likely election of Hilary Clinton, followed by the growing realisation that the reality TV star was about to be handed the keys to the highest office in the land.
The mild recovery can be partly attributed to those who learned from Brexit, and through money at the market once they thought it had hit its likely low.
Overnight, the DOW was very different. A bloodbath was largely expected once Wall Street opened, and it simply didn’t occur.
One theory is that the perceived intervention of the FBI just 8 days out from the election forced markets to price in a Trump presidency. The news of more emails hammered the Clinton campaign and the markets responded.
Once the election decided, the markets recognised that the largest piece of uncertainty had been removed, and returned to business as normal. The higher finish was undoubtedly bolstered by the idea that with the President, House and Senate all in alignment would mean that the six years of legislative roadblocks might finally be out of the way.