Markets Rally After Post-Election Hiccup

By:
Chris Gaetano
Published Date:
Nov 10, 2016
Cash

In a stark contrast to the election's immediate aftermath, markets are rallying to record highs as investors anticipate lower taxes and fewer business regulations, according to USA Today. The Dow climbed 135 points this morning, setting a new intraday record of 18,769, barreling past its previous high in August of 18,636. The gains are not just restricted to the U.S.: Japan's Nikkei 225 is up 6.7 percent, Hong Kong's Hang Seng increased 1.9 percent, the Shanghai composite index grew by 1.4 percent, and both Germany's DAX and France's CAC rose by 0.4 percent. 

Major winners in this stock rally include the healthcare and defense industries, which have both seen major bumps since the election, according to CNBC in two separate articles. 

The New York Times said that Wall Street is expecting that a Trump administration will roll back many of the regulations enacted during the Obama administration, from the new overtime rules to the Dodd-Frank Act in its entirety. However, some of these measures could be a tough sell, even to a Republican legislature. For example, said The Times, many banks have already spent so much money on complying with the Dodd-Frank Act that some are saying they'd rather it stick around rather than having to undergo another series of costly changes. Others, The Times pointed out, could be a little easier, such as the new rule that requires investment advisers to act under the fiduciary, rather than suitability, standard. Regardless, whatever it is the Trump administration decides to do, it will be easier now with the GOP controlling both houses. 

Despite the rally, there are still some areas of concern in the market. The Nasdaq has not been the beneficiary of the Trump Bump with heavy-hitting tech stocks like Apple and Amazon losing ground, according to Reuters. As of 11:38 a.m., the index is currently down nearly 70 points. Reuters said that, unlike other industries, the Trump administration's plans, which generally concern infrastructure, healthcare and finance, don't particularly benefit the tech sector. 

Treasury bonds, too, are having a bad day: Bloomberg noted that the election sparked the biggest sell-off in five years, and a recent sale of 10-year notes drew the weakest demand since 2009. Yields on the 10-year note rose by .02 percent, and the 30-year note yield increased by .03 percent, with Bloomberg saying most of the activity happening overseas. During the campaign, Trump raised the possibility of renegotiating the national debt, which critics said would essentially mean the U.S. defaulting on its debt obligations in a manner akin to Greece or Argentina. 

Further, former Fed Chair Alan Greenspan expressed worry for the economy's future, saying that he predicts sluggish growth and higher inflation, according to CNBC. While inflation will make profit margins increase at first, he warned that this would be a false dawn. 

It is as of yet unknown how Trump's other stated policies, such as a halt on Muslim immigration or accelerating deportations, will play out on the markets. 

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