US Stock Futures Reaction to Trump Victory

November 30, 2016 4:23AM CST

Votes are in and the people have spoken. A Trump victory sent shock waves into the overnight session for stock index futures on November 8 th and since then markets continue to digest the outcome of this election. Dow futures were about 190 points lower after earlier falling 800 points and stock futures fell while bonds rallied according to CNBC news. U.S. futures were volatile as election results started rolling out at around 7p.m. ET and trade volume in eMini S&P futures were about 17 times the average daily volume, according to a note from CitiBank. In Asia, the Nikkei was down more than 4 percent, erasing a more than 1 percent gain on the day

Furthermore, the Mexican Peso, which has been serving as a proxy for Trump, was down sharply against the dollar after rallying during the U.S. trading day on November 9 th . Going forward, the US dollar could eventually go up due to Trump’s stance on the Fed. He has criticized the Fed for keeping interest rates low, and a more hawkish Fed could strengthen the USD, which in turn can negatively affect gold and the overall precious metals sector. This is because rising interest rates typically decrease the gold’s, and historically precious metals move inversely against the US dollar.

Yellen has confirmed Fed rate hike expectations in December, further boosting the dollar alongside expected Trump policies. If interest rates are raised, the general expectation is that US Stock Futures will decline initially along with gold and other precious metals. It is safe to say that markets don’t like uncertainty but this is on another level. Traders should look for a pull-back in S&P 500 futures, the NASDAQ and the Dow futures before going long and playing off the “Santa Clause” rally, but remain cautious as the Fed’s decision approaches.

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