Suffice to say the U.S. stock market wasn’t expecting to wake up to a Trump victory. The initial response in global markets was harsh overnight (one of the good things about having young kids is I get up throughout the night anyway!). But the U.S. markets have come roaring back from down as much as 5% in pre-market trading. Biotech (up 6%), gold miners (up 5%), financials (up 1.8%) and industrials (up 1.0%) are all doing particularly well in early trading today. And small caps seem to have shrugged off the result, preferring to treat this as any other Wednesday. As you can see below, they bounced off their 200-day moving average on Monday, and are basically flat today.
To be perfectly honest, I’m surprised the market is holding up as well as it is. Given Monday’s relief rally after the FBI cleared Clinton (again) of any criminal charges related to her private email server, it seemed Wall Street was very much banking on her winning the election. It just goes to show, again, how unpredictable the market can be.
I think it’s fair to expect at least a few weeks of higher than normal volatility, regardless of how things go today. Part of that is simply due to the expected change from the status quo (Clinton probably wouldn’t have been that different from Obama). But, equally important is the reality that we don’t have many details on Trump’s policies to work with. We’ve heard him speak out in general terms about infrastructure, trade, immigration, energy, tax reform, healthcare, etc., but it was all very high level, theoretical campaign-speak. Policy implementation is a whole different ballgame.
I’ve steered clear of small caps that would have been heavily influenced by either a Trump or Clinton victory, so I don’t expect to make any moves in our current portfolio based solely on today’s results. That said, I think it’s wise to look at each of our positions through fresh eyes. We have gains to protect, and while I know we’re all fine tolerating some volatility, it makes sense to pull back our holdings a little if the market shows signs of cracking. Accordingly, I’m going through each of our positions and assessing their trading action more closely than I typically do.