Trump Wins, Markets Slide

Investors do not like surprises — and as Tuesday night gave way into Wednesday morning, the world markets got a heck of surprise: Donald Trump pulled off the biggest electoral upset since “Dewey Defeats Truman” and won the presidency of the United States.

It was an event that Trump, as of Monday, was predicting would be Brexit plus, plus, plus — and it turns out the stock markets agrees with him entirely insofar as they seem to be as taken off guard by the results of the U.S. election as they were by the Brexit vote in June.

As Donald Trump neared victory, futures on the Dow Jones exchange took an 800 point plunge as investors — who had been pricing for a Clinton victory — were becoming increasingly aware that an upset was in the offing. That plunge stopped and reversed some after Clinton conceded — but as of the writing of this piece a few hours before markets open, the Dow futures are still 422 points in the red.

And the other indexes weren’t wholly encouraging — S&P 500 futures dropped 59 points while the Nasdaq dumped 158 — both big enough to trigger limit downs under Chicago Mercantile Exchange rules. CME sources have confirmed that futures prices on both indexes can trade above the 5 percent haircut they have already taken, but they cannot drop any lower until the markets formally open at 9:30.

As for what’s going to happen when those markets open in two hours?

If the international markets are a guide, a lot of shareholder value is going up in smoke today for those who aren’t in the business of bonds, gold or bitcoin. According to the analysts, our “fear proxies” are the only things gaining ground in international markets as of right now.

Comforting.

As markets opened around the world today, they started shedding value. Stocks in London dropped 4.3 percent, the Hang Seng Index in Hong Kong fell 2.97 percent, the South Korean Kospi tumbled 3.4 percent and the Japanese Nikkei 225 was down 4.7 percent.

Even more comforting.

As for the U.S. markets, no one thinks it is going to be a great day — though how bad a day remains up in the air.

The plunge in stock futures raises the possibility that so-called circuit breakers could come into play when markets open Wednesday. If the S&P 500 falls 7 percent from the previous session’s close before 3:25 p.m. Eastern Time, trading on all stock markets halts for 15 minutes.

It won’t be a good day.

But how long term bad? That actually isn’t quite as knowable as various crestfallen friends of yours on social media are saying right now. As noted at the outset, markets don’t like surprises, and the election result was a surprise. Shock does wear off, and some investors are advising that perhaps some smoothing is around the corner.

“Right now, the markets are heading for the hills, but we’ll see,” said Robert Tipp, chief investment strategist, global bonds and foreign exchange at Prudential Fixed Income. “That’s a function of fear as much as fact.”