Results Are In Trump Wins Markets Plunge then Rebound

It appears that polls and projections in the past few days and weeks have turned out to be severely inaccurate in predicting the outcome of the 2016 US presidential election. After a long and heart-pounding election night, Donald Trump achieved a market-shocking upset by pulling ahead from behind and ultimately defeating Hillary Clinton to become the new President-elect of the United States. Additionally, Republicans retained control in both the US Senate and House of Representatives for a clean GOP sweep.

When the votes began to be tallied early in the night, it appeared that Clinton’s path to victory would be as clear as previously forecast. As the lengthy night wore on, however, pivotal swing states that were crucial to Trump’s chances of victory began to lean increasingly towards the Republican candidate. These key states included Ohio, North Carolina, and Florida, and then extended onto other battleground states that intensified Trump’s momentum.

As Trump’s lead widened and his unlikely path to victory became increasingly evident, financial markets reacted with exceptional brute force. As might have been expected in anticipation and realization of such a surprise outcome, stock index futures (including the S&P 500 and Nasdaq) plunged by around 5% at one point, while the US dollar embarked on a dramatic dive against most of its major counterparts, including both the euro and Japanese yen.

Perhaps the most notable exception to this dollar move was the reaction of the USD/MXN currency pair. As the Mexican peso made an unprecedented plummet on renewed fears of a Trump presidency, USD/MXN shot up to a new and extreme all-time high around 20.77, far above the previous record high of 19.90 that was hit in September.

Meanwhile, as the US dollar dropped against most of its other key rivals and the perception of overall market risk rose substantially, the price of safe-haven gold surged by almost 5% at one point in the night.

As of the early hours of Wednesday, the initial market reactions to Trump’s surprise success have rivaled, and in some respects exceeded, the market moves in the immediate aftermath of June’s equally surprising vote by the UK to leave the European Union (Brexit).

How these extreme initial moves ultimately play out further into the week and month remains to be seen. But as various markets have arguably overshot in reaction to election night, counter-moves could soon be expected as the world and the financial markets become accustomed to the concept of a President Trump.

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd . This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.