Typing this as I listen to the election coverage on November 8, 2016…
They are talking about how the markets are reacting to the prospect of a Trump presidency. According to the guest futures are down because Trump brings more uncertainty. But this point of view should be challenged because the new president won’t take office until January 2017. Why should the markets be reacting to Trump tonight?
If I recall correctly, the guest said that the nikkei and Dow Jones were both down approximately 2%. My half- assed internet research indicates that average Dow movement is 0.03, so 2% is a big move. But, that doesn’t necessarily mean the move is caused by the uncertainty of a Trump presidency. I could try to research support for my point, but that’s a little above my pay grade.
Instead, let’s focus on the investors with the clout to move the market index. Presumably, they understand the US electoral system and act rationally. Accordingly, they should be planning for what to do in January rather than frantically engaging in after-hours trading. Ok, maybe I’m armchair quarterbacking here; I’ve never managed billions of dollars of other people’s money. Still, the guest didn’t really cite any support for his assertion that Trump was causing this market move. Additionally, if Trump is causing uncertainty in the market then investors should be moving towards something safer like… US Treasury bonds? US dollars? The guest was silent on this question.
There are some other questions worth asking about these claims. To borrow from criminal defense attorneys: if this is true what else must also be true? What if things had gone a little differently? (There is another one but I can’t remember it right now). Also, I’m not going to try and answer them either. These questions are worth asking of anything that someone tries to tell you is true (if you can remember them).