- The 2016 election outcome surprised markets and defied polling expectations leading up to November 8, as Donald Trump won the electoral vote and will be the next President of the United States. Republicans lost a limited number of seats in Congress, but will maintain control of the Senate and House of Representatives, upsetting expectations for a divided government in which the two major parties share power.
- In light of the unexpected outcome, the capital markets reacted quickly last night as results increasingly pointed towards a Trump victory. Safe assets were favored over risk assets. The immediate reaction was sharp, but much of the move in the U.S. dollar, long-term Treasury yields, and equity futures reversed course by the opening bell this morning.
- Many are comparing the market’s reaction to the aftermath of the Brexit vote, which triggered an immediate selloff in global equities, but was followed by a swift recovery in a matter of just days thereafter as investors absorbed the news.
- These types of unexpected events can create short-term volatility in capital markets, but it’s critical for investors to maintain a long-term view and a clear picture of what they are trying to accomplish with their investment goals and objectives. While investors cannot control what the market will do – they can choose how to respond. For most investors, the right answer is to stay the course.