What A Trump Victory Really Means For The Market

Tyler Durden's picture

Just like with Brexit, the so-called Wall Street experts scrambled to paint a picture of doom and gloom, warning traders, and markets, that the end of the world is imminent should Trump win, and that stocks could drop by 5%, 10% or more should Donald Trump get elected president. And again, just like in the case of Brexit, they convinced the algos and the momentum chasing traders. Briefly. Because after futures hit the 5% down limit shortly after the market realized it was dead wrong about the presidential election, they have since soared nearly 80 points of the overnight lows and are well above the Friday, pre-Comey close, level.

How come?

Simple: as we have repeatedly said, a Trump victory, coupled with lower taxes, a spike in infrastructure spending, and a surge in debt is precisely what the economy - and a normalized market, one not manipulated daily by central banks - wanted and needed, as it not only will prompt yields to rise, but it will assure even more QE in the near future as foreign buyers of US debt disappear (assuming Trump does not do away with the Fed entirely, which for a man running a real estate empire, he won't do as he ultimately needs lower rates).

As Trump said overnight, in a far less combative speech than pundits had expected, "We're going to rebuild our infrastructure...we're going to put millions of people to work as we rebuild." A tax-cutting and big-budget extravaganza means Treasuries will have a hard time staying higher, it also means a steepener yield curve, just the thing banks need and explains the jump in bank stocks this morning.

It also means much more fiscal stimulus, as various pundits discovered overnight.

“Fiscal stimulus seems to be the most logical explanation, with Trump and a Republican Congress expected to deliver higher deficits,” Gennadiy Goldberg, an interest-rate strategist in New York at TD Securities told Bloomberg.

A good comprehensive summary of what Trump's victory really means came from DB's Jim Reid who said that a Trump win is likely to be viewed negatively across a wide range of assets in the short-term but the range of medium-term outcomes are much wider.

It increases the chance of higher fiscal spending but it will also reinforce the backlash against globalisation and associated forces of which migration policy and trade are obviously likely to be heavily scrutinised.

 

So as the trend is already pointing to, expect lower risk assets at first, lower bond yields on a flight to quality but then higher yields once his spending plans are digested and an equity market that might at some point benefit from reflationary policies but with greater risks (lower trade and global openness) and higher volatility.

 

First Brexit, now Trump and the 2016 anti-establishment triumvirate could be formed in less than 4 weeks by a 'No' in the Italian constitutional reform referendum. The political world is changing and the consequences are likely huge over the years ahead. As we discussed as the main theme in our long-term study in September (An Ever Changing World), the 35-year super cycle in assets, politics, policy and globalisation has likely turned.

Furthermore the sharp rebound in December rate hike odds suggests that the market is certainly not worried that Trump will crush the economy overnight, and that Yellen may well go ahead with a December rate hike after all (even if it means pushing the US into a recession, then cutting rates and launching the much desired QE4).

There is also more good news for coal and other energy companies, who are certain to benefit as Trump moves the US away from the progressive "clean" agenda.

Not everyone will benefit: now that Republicans have swept the US government for the first time since 1928, it means Obamacare is over - just a matter of time - and Affordable Care Act-vulnerable stocks such as Universal Health Services, AmSurg and Mednax will likely plunge; on the other hand pure pharma stocks like MCK and ABC will benefit as rhetoric on drug pricing will diminish significantly, leading to more stable earnings if/when changes in drug pricing become more stable.

And while we will have much more to say about this in the coming days, here is a good "first take" from Bank of America's Michael Hartnet.

Result: Trump wins

US election + BREXIT = populist repudiation of era of inequality, globalization, wage deflation; cements BofAML themes of peak Liquidity, Inequality, Globalization + Main St over Wall St. Electoral trends could mark secular low in long-term bond yields (Chart 1).

Tactics: credit spread to determine entry point

Gold surges toward $1400/oz, S&P 500 tumbles to 2000, 10-year Treasury yield to 1.5%; if credit spreads don’t crack (e.g. IBOXHYSE<500bps) and Mexico peso finds quick low = entry point for risk-takers (especially if Trump protectionist fears allayed); until then best Trump trades = long gold, short EU banks, long US small-cap, short EM.

Macro & policy: inflation and stagflation expectations rise

Uncertainty shock = lower US GDP estimates; markets will price in EU fragmentation; Fed likely passes Dec; but ultimate global growth impact of Trump will depend on whether protectionism or Keynesianism triumphs; either way inflation/stagflation = destination as policies focus on ending wage deflation via immigration controls, trade protectionism, fiscal spending. In our view, Republican sweep boosts probability of more meaningful fiscal stimulus to combat inequality.

Asset allocation: small returns, big rotation

No change in BofAML asset allocation: overweight commodities, real estate, stocks and underweight bonds. Rotation towards assets, sectors, markets that benefit from higher inflation and steeper yield curve may take longer to play out but destination is clear. The risk is protectionist policies could lead to rising expectations of stagflation. Note 1970s “stagflation” was positive small-cap, value and energy stocks, commodities and real estate, negative large-cap, growth, tech and utilities stocks

* * *

Trump Q&A: the Presidential Inflection

Here's a quick take on the impact of Donald Trump's victory in the US Presidential election on the macro and the markets.

1. What does the Trump victory signify?

Victory for populism, another vote against inequality, raises risk of stagflation, likely will provide one of the last great opportunities to reduce exposure to bonds. US election + BREXIT = populist repudiation of era of inequality, globalization and wage deflation; cements BofAML themes of peak Liquidity, Inequality, Globalization, Main St assets over Wall St. Last time electorates shifted in this manner was 1980 when electorate said “end inflation.” Bond yields peaked. Today electorates seem to be saying end wage deflation via immigration controls, trade protectionism, fiscal spending (Chart 1).

2. Does US election result change our asset allocation views?

No. We are currently overweight commodities, real estate, stocks and underweight bonds. Trump victory will cause short-term risk-off and preference for Developed Markets over Emerging Markets. Rotation towards assets, sectors, markets that benefit from higher inflation and steeper yield curve may take longer to play out but destination is clear.

We believe peak liquidity, peak inequality, peak globalization = peak returns for stocks and bonds in coming years. Given the starting level of global interest rates for the next US president (5,000-year lows!) total returns likely to be exceedingly low in the coming years. Same for positioning: asset allocation of BofAML GWIM clients January 2009 Obama inauguration: Equity 42%, Debt 32%, Cash 19%, Other 6%. Today, GWIM asset allocation: Equity 57%, Debt 25%, Cash 12%, Other 5% (Chart 2).

 

3. Does the US election result change our views on the macro and policy?

Yes, at least initially. Economists are likely to lower growth estimates due to "policy uncertainty". The election takes place amidst an improving global economy with global earnings revision ratios at 5.5-year highs, global PMI’s at their highest levels since early- 2014, Asian exports at 12-month highs and US wage growth at 7-year highs. Trump’s victory could temporarily derail stronger growth, higher rates narrative by raising expectations of a) protectionism, b) the Italian referendum following Brexit and US election as repudiation of elites and c) the Fed keeping rates on hold in December.

The Fed will likely be on hold in December. Trump’s criticism of Fed Chair Yellen is likely to unsettle global Treasury investors. On fiscal policy, he will likely push for tax cuts for individuals and businesses and a bipartisan deal to repatriate $2tn in foreign earnings at lower tax rates to fund federal infrastructure spending.

Uncertainty shock = lower US GDP estimates; markets will price in EU fragmentation; Fed likely to pass in Dec; ultimate growth impact of Trump will depend on whether his protectionism or Keynesianism triumphs; either way Trump will boost inflation/stagflation expectations as electorates say end wage deflation via immigration controls, trade protectionism, fiscal spending. 1970s “stagflation” was positive smallcap, value and energy stocks, commodities and real estate, negative large-cap, growth, tech and utilities stocks (Chart 3).

4. What is the trade?

Gold surges toward $1400/oz, S&P 500 tumbles toward 2000, 10-year Treasury yield to 1.5%; key is that credit spreads do not crack (e.g. IBOXHYSE<500bps – Table 1) and Mexico peso finds quick low = entry point for risk-takers (especially if Trump protectionist fears allayed); until then best Trump trades = long gold, short EU banks, long US small-cap, short EM.

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Belrev's picture

Powerful 3 minute video about how Donald Trump became President of the United States of America

BREIXT US STYLE

https://www.youtube.com/watch?v=K8DMjGx2B_k

FatTony7915726's picture

All that crooked jew money from the tribe could not buy Hillary the White House because the working class americans are taking back their country.  

Belrev's picture

They rigged the polls and the votes enough to cut his lead from 10% to dead even.

Shocker's picture

Good to see, but we still have a long road ahead. Its time to turn this economy around

Layoff List: http://www.dailyjobcuts.com
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jbvtme's picture

nice to see ron paul and andrew napolitano in the cabinet.

Keyser's picture

Trey Gowdy for Attorney General, just to watch the Dims scurry into dark corners to avoid prosecution... 

FireBrander's picture

Q: Why was the press so wrong in reporting a "sure thing" Hillary landslide win?

Some idiot on CBS This Mornimg.

A: The press was "lied to" by the pollsters and strategists.

 

Get the fuck outa here...

 

One problem there fuckhead...one of the "pollsters" and a shit fucking ton of "strategists/experts" are CBS employees.

 

~~~~~~~~~~~

Correct answer:

The polls were wrong because YOU USED THEM TO LIE TO YOURSELF FIRST, and the AMERICAN PEOPLE SECOND....you used the polls to PROJECT YOUR WISHES RATHER THAN THE TRUTH.

Yes We Can. But Lets Not.'s picture

Well done, Ogoofer.  Eight years you had. People were so hopeful. You more than doubled the national debt by adding $10,000,000,000,000.00, lost the Senate, lost the House, lost the world that had supported you, and now you've lost the WH, lost the Supreme Court for probably at least a decade, lost your 'signature' achievement - Obamacare, and in your weakness you resorted to using Executive Orders which will now all be reversed.  Yeah, Trump beat Clinton, but who Trump and America really beat is you.

Could you possibly have fucking sucked any worse?

FireBrander's picture

Could you possibly have fucking sucked any worse?

>On the way to 800 of "his people" dead on the streets of his hometown; Chicago.

>30,000 DEAD in Libya

>470,000 DEAD in Syria

>Millions of "refugees"

>Strategic military bases in the Philippines LOST to CHINA and RUSSIA.

More, lots more...

CuttingEdge's picture

Does this all mean Gartman is losing money again today?

The Sculptor's picture

What a Trump victory means?

FREE JULIAN ASSANGE

Dabooda's picture

And Snowden. And Manning.

PrayingMantis's picture

 

... as a deplorable, I just want to take a moment to write my respects and bid good riddance err goodbye to these celebrity clintonite retards ... and perhaps that weasel Robert De Niro, fellatio-promising Madonna, moloch-worshippers Jay-Z & Bey-once, Bruised Springsteen and other clintonite retard celebrity would follow their lead ...

          Here’s a list of those who’ve promised to leave if Trump wins:

Bryan Cranston - “Absolutely, I would definitely move. ..."

Samuel L. Jackson - "... I’m moving my black ass to South Africa.”

Lena Dunham - "... I know a lovely place in Vancouver.”

Neve Campbell, already a Canadian citizen, has promised to repatriate herself.

Natasha Lyonne has picked a “mental hospital” for her political exile.

Cher – “I’m moving to Jupiter.”

Miley Cyrus – “... I don’t say things I don’t mean!”

Barbara Streisand – “I’m either coming to your country if you’ll let me in, or Canada.”

Ne-Yo, like so many others, plans to bug out to nearby Canada.

Amy Schumer – “I will need to learn to speak Spanish, because I will move to Spain or somewhere.”

Chelsea Handler – “I did buy a house in another country just in case. So all these people that threaten to leave the country and then don’t — I actually will leave that country.”

Jon Stewart. “... going to another planet,”

Whoopi Goldberg – “Maybe it’s time for me to move, you know. I can afford to go.”

Keegan-Michael Key - planned exile to Canada ... “It’s like, 10 minutes from Detroit. That’s where I’m from; my mom lives there....”

George Lopez - emigre who’s vowing to move South. Indeed, he says Hispanics will “all go back.”

Ali Wentworth, wife of ABC newsman George Stephanopoulous, said that “If Trump wins, we’ll start looking at real estate in Sydney, Australia. No crime, no guns.”

SC Justice Ruth Bader Ginsburg – “Now it’s time for us to move to New Zealand” (she’s already backtracked and apologized).

Al Sharpton - plans for destinations unknown and says he has been “reserving my ticket out of here.”

America has been waiting since 2000 for Alec Baldwin to keep his “unequivocal” promise to leave. Even his wife-at-the time, Kim Bassinger, promised to leave with him. Rocker Eddie Vedder, actor Matt Damon and director Robert Altman were supposed to depart on the same boat, but they stayed.

Barbra Streisand holds the record for entertainers-in-exile-who-are-still-here. Her promise to leave dates back to the Clinton-Bush Sr. campaign of 1992. She’s still here.

source ~ http://www.wnd.com/2016/11/celebs-who-said-theyd-leave-u-s-if-trump-won/

 

Hope Copy's picture

What about the ''miracle' that did not do it', all the DEAD that voted...

Secret Weapon's picture

You are saying mean things.  Leave Hilliary alone! (Best meltdown ever. Taking place now all over the country)

https://www.youtube.com/watch?v=58Quv42iE68

legalize's picture

800 dead in Chicago is probably just this year alone.  According to wikipenis, the total from 2008 to 2015 is 3,715. Add on this years murders and he's easily topping 4,000.

Son of Loki's picture

Truned out to be a Landslide after all. I like Gowdy also. Carson for SG. Put Giulianni somewhere and Newt also. They are loyal and good people.

However, it's crucial to drain the swamp as much as possible and rid DC of the corrupt politicans who line their pockets with blood money.

Arnold's picture

I still nominate Willie Hugh Nelson for IRS Commissioner.

NumNutt's picture

Blood Money = blood of the few that still have businesses and jobs.  Time to put socialism back in the closet for now, funny how they try every 20 years or so to bring that crap out into the limelight as the cure all for everything, and it will make everyone so happy. Just to have it fail, and leave more people destitute then all prior systems. Hopefully the little socialist snowflakes will have their eyes opened to reality when things get back to normal, and will have second thoughts about socialism the next time it is dragged out and dusted off for another attempt at curing the worlds problems.

legalize's picture

I could care less about Newt, despite loyalty.  They had a chance to fix health care when he was speaker and they did nothing and that's why we got obamacare in the first place.

hardmedicine's picture

whenever I'm depressed and feeling a "rainy days and mondays getting me down"  I go and watch Trey Gowdy..................... and BAM I am cheered up immeasurably!!!

Trey Gowdy for ATTORNEY GENERAL

sun tzu's picture

Giuliani for AG and Napolitano for Supreme Court

Gold Pedant's picture

Giuliani for AG?

Trump promised to drain the swamp. A neocon NYC dictator is the last person that I want as the AG. I still remember that crook in the '08 debates. Go back and watch them.

Ms No's picture

They need to find a young constitutionalist pitbull that has never screwed any kids and has a saintly history.  That way the Epsteins don't have them. They need to be young so that they are around for awhile.  Maybe with any luck a couple more of arbitrary ones might take a trip to the other side. 

Cognitive Dissonance's picture

My view is the same. They tried to rig the election, but couldn't do enough to overcome the resurgent rural vote where rigging is more difficult.

BabaLooey's picture

Correct Cog.

Hard to rig a landslide.

They tried.

The MSM was clued into it - if you watched them in early in the morning.

I figure Trump REALLY got 60% of the LIVE, LIVING, ACTUAL VALID votes - at least. Maybe 65%

 

Took Red Pill's picture

It was a valant effort. Hillary actually won the popular vote so I guess they thought they had it in the bag.

http://www.ibtimes.com/who-won-popular-vote-latest-polls-show-hillary-cl...

 

55 men's picture

i dont believe for 1 second she won the popular vote fair and square.....ya the computer said she did, whos computers where those again?

LawsofPhysics's picture

Yep, now and probably more importantly, I want to know who gets to build the guillotine for Janet, Ben, and Alan, to name a few...

 

What happens with the Fed is what I will be watching next.

adanata's picture

 

Yep... I knew they did not have the technology to rig a landslide... 

Tomorrow is another question; this is something vital we need to make SURE of.

PAPER ballots for all and KEPT in public view at ALL times.. no exceptions

GreatUncle's picture

Yep Trump need to make it first order of the day ... clean up the voting and prosecute using the veritas videos.

If not it will be around again in 4 years another mind fuck and bigger.

Also challenge Apple on the legitimacy of a never Trump app. that transfers votes across electoral college areas.

 

Weisshaupt's picture

We should be dying fingers in ink too. 

seek's picture

I'm sure it's too much to hope for a nationwide audit of the vote, but I'm convinced they probably gave H 10 points in key states and it still wasn't enough. They greatly underestimated just how pissed off the country is.

We had reports of ballot stuffing in Florida and widespread reports for PA, to the point they weren't letting court-appointed monitors into the rooms where the ballots were, and both states were still carried by Trump. This landslide was far bigger than they imagined or the result reflect.

I really hope voting reform is one of the things that gets done by the new government. This kind of manipulation has got to stop. I'm sure we'll never clean up Chicago, but there's no reason we can't take care of the rest of the country.

hardmedicine's picture

My contention was that if you could see the ACTUAL numbers that it would have been 80/20 in favor of Trump. 

sandhillexit's picture

You caught this right?  Kaine, quoting Faulkner....(stay alert boys (that includes you, Vlad!)) 

“Well, Kernel , they kilt us but they aint whupped us yit, air they?”  

FatTony7915726's picture

The 200 Million dollar donors to Hillary's campaign need a solid black cup of coffee this morning! (a little secret, they are all from the tribe)

https://libertyblitzkrieg.com/2016/11/05/meet-the-million-dollar-donors-...

scaleindependent's picture

Stupid article.  "A surge in debt is precisely what the economy  wanted and needed".


So Trump's presidency will create a surge in debt...

 

crickets...

 

I thought that was what we were against?

 


Yes We Can. But Lets Not.'s picture

"They rigged the polls and the votes enough to cut his lead from 10% to dead even."

Agreed.  If Trump really cares about America, and I've no doubt that he very much does, he'll quickly set about the critical objective getting tech completely out of the voting and vote processing system, and get back to proven, reliable, unriggable, old-school votings systems.

Fuck you, Soros.

crossroaddemon's picture

I still maintain that they didn't "massage" the numbers... it was outright rigged, and they probably didn't even count the actual votes in the states that mattered. Which means trump was their pick. Either way the tribe was and is going to win.

SheepDog-One's picture

So the right choice would have been Hitlery then for fucks sakes? We only had 2 actual choices you know....what are you talking about?

Memedada's picture

That’s the point. Your Masters have you by the balls. You’re – including the majority on ZH – so dumbed down/indoctrinated that you believe that the only choices you have are the ones presented to you by your masters.

This election is no different. The anti-establishment sentiment is real – the candidate is not.

Hillary is/was an obvious candidate for the FIRE-sector. She has a proven track-record of being by and for the 0,01% (the ownership class – the class that owns USA). Trump is one of the 0,1% (and yes, he is not one of the 0,01% = he has owners too). Trump is himself a beneficiary of the “Ponzification”/financialization of the economy. His personal fortune is directly linked to the policies of “free money” (fiat) for the “capitalists” (the ownership class) and austerity for the plebs.

He will serve TPTB as all in the current system will.

The choice is not within the system (chose between two candidates of the same f*cked/rigged system) – that was an illusionary choice.

The choice is between rebellion or compliance. Voting for who should be “middle-management”/POTUS of US Inc. is the latter.  

jewish_master's picture

yes they try to capture this populist movment with trump. my bet that they will fail. that was thier plan all along. they realized the movment is real, and either they try tocapture it or fall to it. same as roosvelt was back in the day. it was close to communist revolotion in 1930, similar to what happened in germany with facisem( prussia was pro military so it was the natural choice)

so expect trump to do 180, like obama did. however this time it will be greeted by  violent clashes, in the next 4 years.  this is the start of the fight, not the end.

crossroaddemon's picture

You know, I think it'll be greeted with resignation. People will keep going to their jobs and paying taxes like good little sheep.

hardmedicine's picture

I don't know that I agree with you because what in the world did trump want to be president for?  He was already rich, has a great family, was probably  looking forward to retirement. 

                                HOWEVER

I am watching closely for the first signs of  a  "180".  and I can tell you that the American people are so mad and upset right now if it comes down that Trump and any "handlers" lied to us and he doesn't 1. shut down obamacare 2. build the wall  3. block illegal immigration, 4 renogotiate NAFTA and bring back jobs here. then I promise you this.  there will be a revolution in 4 years and the time for the voting box will be truly over.  I hope you are wrong, but I'm aware and ready for anything at this point. I don't want to descend into truly hopeless cynicism but I WILL GO THERE........ if the truth on the ground warrants.
"

LawsofPhysics's picture

The resource requirement for the current system/status quo is fucking huge.

 

This will define what happens next, period.

GreatUncle's picture

Actually whoever you pick will be controlled by elites and TBTF.

They tried to put in your face corruption and globalism on the table you rejected it and they would have preferred it.

Trump, more of what we as humans understand and none of the single nation world for now but it will come I don't doubt.

So best enjoy the moment, prepare for it will be with upon us again.

Next time they will not put so blatant a corrupt person as one of the choices, they learned the lesson on that one.