Global Markets Plunge As Republican Donald Trump Gains Clear Path To U.S. Presidency

(Stillness in the Storm Editor) Trump just announced that Secretary Clinton has conceded. The Trump presidency is all but assured. 

Source – Forbes

by Antoine Gara, November 9th 2016

Markets around the world are beginning to price in a Donald Trump victory, as the Republican nominee’s path to the presidency has become almost inevitable after a sweep of many hard fought swing states in the midwest, southeast, and rust belt. As the votes rolled in for Trump, U.S. stock markets plunged with futures on the Dow Jones Industrial Average falling 506 points, or roughly 4%, as investors began to brace for Trump’s agenda and his anti-free trade views.

However, the campaign for Democratic nominee Hillary Clinton said at 2 a.m. ET it would not concede the election in the early morning hours, as votes continue to be counted in Pennsylvania and New Hampshire. At 2:29 a.m. ET, CNN called Wisconsin for Trump, putting his electoral college tally at 257 votes, just 13 more votes needed to win the presidency.

Though Clinton did not concede defeat and no major news network called the election, the delay only forestalls what appears to be one of the great upsets in American political history as Trump climbed to a probable victory from what many political commentators considered to be a rout just weeks ago. Ahead of an election call or concession from Clinton, traders around the world cast votes with their dollars, selling risk assets and piling into safe havens.

Fear of a Trump presidency was evident at the open of trading in Europe, where stocks in London plunged over 4%, and losses accelerated in Asian markets. The Hang Seng Index in Hong Kong tumbled 2.7%, the South Korean Kospi fell 2.5% and the Japanese Nikkei 225 was down 5.1%. Australian and New Zealand markets fell by a similar measure.

Assets that rise in value during periods of market upheaval, for instance U.S. dollar, gold, and government bonds, surged. Gold rose $41 to $1,316 a troy ounce, or over 3.2%. Ten-year U.S. Treasury note yields fell 12 basis points to 1.73%, indicating an investor flight to the safety of government bonds. The euro fell 2%, while the Japanese yen fell 3%.

The Mexican peso, the asset that has swung most violently depending on prospects for the presidential vote, plunged. On Tuesday, as Democratic nominee Hillary Clinton showed strength in early voting, the peso rose to two-week highs. However, it tumbled over 13.07% after midnight when CNN called a string of states for Trump including Ohio, Florida, Iowa, North Carolina and Utah.

Virginia and Michigan are trending in Clinton’s direction, while Wisconsin, Pennsylvania and Arizona are moving in Trump’s favor. New Hampshire remains too close to call.

As voting has come in decidedly in favor of Trump, defying the expectations of almost every national poll and many state polls, it was the IBD/TIPP Tracking poll that may have won Tuesday. It predicted Trump’s victory in a final national survey on Tuesday afternoon.

Others who foresaw Trump’s outperformance in the general election, for instance DoubleLine Capital’s Jeffrey Gundlach, did not back down from their calls on Tuesday.

“I think we can all agree that Donald J. Trump has massively outperformed expectations in the past,” said Gundlach on a conference call with investors Tuesday evening. Such an outcome would “cause a downgrade of global growth expectations or maybe even a global growth scare,” Gundlach told FORBES earlier in the year.

Billionaire hedge fund manager Dan Loeb of Third Point LLC also said last week he reduced his market exposure and increased hedges ahead of the election, comparing the vote to Britain’s vote to leave the European Union in June.

“We clearly didn’t predict the outcome of Brexit, but we definitely saw that as a point in time where you had to ascribe some percentage to a scenario where there was a surprise. So we’ve done the same thing here,” he said on Nov. 4.

9:53 p.m. ET: Stock futures turned sharply negative and the Mexican Peso plunged against the U.S. dollar, reversing gains as Donald Trump expanded his lead on Hillary Clinton in the state of Florida. At 9:35 p.m. ET it was Republican nominee Trump who was in the lead by roughly 125,000 votes in Florida. The peso plunged over 7.9%, while stock futures were beginning to trade down sharply. Dow Jones Industrial Average futures fell over 489 points, or nearly 3%. Democrat leaning counties such as Broward and Miami-Dade hold most votes remaining to be counted, however over 95% of the vote is in. Fear proxies like gold and futures on the CBOE volatility index are surging as Trump gains a path to the presidency. Gold rose 2.34% after 9 p.m. ET.

CNN has called New York and Connecticut for Clinton, while Trump won three of five electoral votes in Nebraska, in addition to the states of North Dakota, South Dakota and Louisiana. States that are too close to call include North Carolina, Virginia and New Hampshire, while Trump is expanding leads in Ohio, Michigan and Wisconsin.

8:35 p.m. ET: Dow Jones Industrial Average futures pared gains as the state of Florida was up for grabs with over 90% of the vote in. As of 8:35 p.m. ET, Trump was winning Florida by roughly 83,000 votes with 48.9% of the vote versus Clinton’s 48% of the vote. Dow futures, which were up over 100 points, pared gains to 36 points. Trump has won Alabama and South Carolina, according to CNN. Clinton remains in the lead in North Carolina, Ohio and Michigan as the vote begins to come in. The U.S. dollar has begun to strengthen against the Mexican peso, rising 0.7% as Florida has tightened.

8:19 p.m. ET: Stock futures hit session highs after voting results from Florida and North Carolina showed Clinton clinging onto leads with well over half of the vote in. Clinton has won Illinois, Maryland, Delaware, Rhode Island, New Jersey, Washington D.C. and Massachusetts, while Trump has won Oklahoma, Mississippi and Tennessee, according to CNN.

7:35 p.m. ET: Trump has won Indiana, Kentucky, West Virginia, according to CNN. Clinton has won the state of Vermont, while races in North Carolina, Virginia, Georgia, South Carolina and Ohio remain too close to call, according to CNN. Early voting calls caused weakness in Australian stock markets as they opened Wednesday trading, and rising investor jitters reflected by a rally in gold and a 1.1% slump in the Mexican peso versus the U.S. dollar after it closed at two-week highs on Tuesday.

6:05 p.m. ET: Futures for the CBOE Volatility Index continued to fall in trading after the market close, while the Mexican peso continued its surge against the dollar. As of 6:05 p.m. ET, the peso was trading up 0.22% against the dollar. This trading indicates investors have maintained an expectation of a victory by Clinton over Trump.

4:00 p.m. ET: Stocks closed higher heading into U.S. presidential election results with the S&P 500 Index closing up 8 points, or 0.39%, at 2,139. The Dow Jones Industrial Average rose 0.4%, closing at 18,332 and paring some gains near the end of trading. Indications of investor fear such as the CBOE Volatility Index, gold, and the Swiss franc all fell on Tuesday, locking in a two-day risk rally ahead of the election. “The market expectation is a Clinton presidency,” said Joseph P. Quinlan, chief market strategist at U.S. Trust, at the close of trading.

The Mexican peso, the asset most correlated to investor perceptions of who will take the White House, rose 1.2% versus the dollar. Stocks rallied after futures trading opened lower on Tuesday morning and volatility was on the rise. Those fears mitigated as traders took in polling data, which showed resilience from Clinton. In a Clinton win over Trump, U.S. Trust’s Quinlan expects a rally heading into 2017. “The global economy is being run by the U.S.” Quinlan said, noting improving employment and income data. “With this big event behind us we are positioned for higher equity prices by the end of the year, and I think dramatically so,” he added.

3:30 p.m. ET: The CBOE Volatility Index, or VIX, rallied in late trading as investors sought a way to buy protection against market risk heading into the close of trading. The VIX has tumbled over the past few trading sessions, in concert with rising equity markets, as investors began to price in a win by Democratic nominee Hillary Clinton. The VIX rallied from down as much as 6% on Tuesday to slightly in the green by 3:15 p.m. ET, but equity markets held onto their gains. Confidence was bolstered when a Las Vegas judge denied a request by the Trump campaign to impound ballots from some polling stations in Clark County, Nevada.

2:28 p.m. ET: Markets began to sell-off in mid-afternoon trading after Republican nominee Donald Trump sued the Clark County Registrar of Voters, seeking to impound and segregate ballots from early voting on Friday, Nov. 4. Trump alleged in a suit the registrar “unlawfully” extended voting hours by allowing voters to enter lines after an 8 p.m. deadline. The lawsuit, targeting areas of heavy reported early voting, sent the S&P 500 Index off intra-day highs to 2,139, up 0.39%, and caused fear gauges like the CBOE Volatility Index to pare early losses.