US stocks face grim day, but worst fears recede
Ken Odeluga November 9, 2016 1:45 PM
<p>U.S. stock markets are facing a dramatic tumble at the open, but one with a magnitude more akin to ‘4’ on the Richter Scale than ‘9’, after Donald Trump’s shock presidential election win.</p>
U.S. stock markets are facing a dramatic tumble at the open, but one with a magnitude more akin to ‘4’ on the Richter Scale than ‘9’, after Donald Trump’s shock presidential election win.
S&P 500 have futures pared back losses as deep as 5% to trade just 2% lower at the time of writing.
Also worth remembering: whilst indicators like Average True Range (ATR) are less useful for extreme market episodes like Wednesday’s, they are popular tools with traders and place limits on prevailing views about market swings.
Such views can of course be self-perpetuating.
ATR readings for notable S&P 500 routs—like on 24th June, and the height of autumn 2015’s ‘yuan devaluation’ sell-off—suggest an S&P drop contained well within 5%.
(The U.S. benchmark index fell less than 3% at its worst on 24th June, though it did lose about 5% over two days before rebounding on 28th.)
One reason for the moderate wind-back of bearish expectations could be that whilst market-preferred candidate Hillary Clinton lost the White House race, The Republican Party aced just as critical races for the Senate and the House of Representatives.
Paul Ryan, the Rep. House Speaker was comfortably re-elected, and a closer and widely scrutinised race for the re-election of Patrick Toomey for the crucial Pennsylvannia Senate seat was also won.
There had been fears that the staunch fiscal conservative—who still has not formally endorsed Trump—might become another Trump political victim.
With projected probability of both Senate and House now well above 90%, U.S. stocks may be reflecting the view that built-in checks and balances will come into play.
Naturally, the fact that the GOP is dominated by its traditional wing also implies that an unpredictable Trump administration will not have anything like a free rein.
Markets remain essentially unpredictable too though, and there’s little doubt that investors on Wall St., and around the globe will have more than a few open-mouth moments in upcoming trading sessions.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.