The Market Plunge That Wasn’t Follows The Clinton Victory That Wasn’t

They said he couldn’t win. They said the markets would tank if he did.

Trump did. Markets didn’t.

In what could only be termed a stunning (stock) rally after a stunning (election) victory, at this writing, U.S. equities are up 70 basis points pretty much across the board, as measured by Standard and Poor’s 500 Stock Index, the tech-heavy Nasdaq and the Dow Jones Industrial Average.

Quite a reversal, considering that, overnight, various futures across various exchanges were pointing toward losses at the open at 4–5 percent.

So, what gives? Why the rally? The initial simple answer is that at least the uncertainty over who is going to occupy the Oval Office is over, and that gives some clarity over what might happen in terms of economic, fiscal and monetary policy going forward.

The big winners on the day as is germane for the payments industry: bank stocks. You know it’s a huge day when even Wells Fargo is up 5 percent. Likewise, Bank of America is up 4 percent intraday. Recall that Trump has said in the past that he would roll back some of the regulations that are in place via Dodd-Frank. And in addition, as has been seen in the past, trading volatility has led to outsized gains in the financial and asset management divisions of these firms. As they say, brokers make money whether you buy stocks (or bonds) or sell them.

Of course, there’s the implication that taking a tougher stance on international trade may, in fact, crimp some expansionary efforts of the banks themselves, especially in terms of lending to firms that may want to do business in other locales. And could cross-border payments slow a bit as a result? The short answer here is that the Trump effect is a mixed bag, and just how mixed remains to be seen.

One other spur for stocks today is coming through the notion that the Fed will hold off on rate hikes — at least for the time being. So, a December rate hike is not really in the offing. And with no rate hike in the near term, investors crowd into stocks, chasing returns.

They said it couldn’t be done. But it’s been done. Let’s see what can be done next.