As evidenced by betting markets and poll aggregators like Nate Silver’s FiveThirtyEight model, the stock market priced in a win for Hillary Clinton ahead of yesterday’s election. Donald Trump’s victory certainly caught investors off guard. While Trump is a bit of a wild card, bringing economic and political uncertainty into the equation, the end of the election brings a level of stability to financial markets.
S&P 500 futures initially tumbled as much as 5% late Tuesday night, triggering a trading halt, but when the market opened Wednesday morning, investors had digested the news and the market actually rallied throughout the day. The market fear gauge, VIX, which breached 20 ahead of the election, is down to 14 this morning.
As we’ve previously pointed out, elections historically have very little effect on the stock market – the trend prior to the election continues after the election. Initial evidence appears to again prove this to be true.