09 Nov 2016 A Stunning Rebuke of the Status Quo
Donald Trump’s victory proved a shock to pollsters, gamblers, and stock & bond traders. Stock futures swooned 4.5% last night, but have since mitigated most of their losses. As of this writing the S&P 500 is down only 0.5%.
On the bond side, fears that Mr. Trump’s spending will be inflationary whipsawed yields during election night. Bond traders took the 30-year Treasury yield from 2.62% at 7:00 pm EST, when early results started coming in, to a low of 2.5% at 10:30 pm EST before they shot up to a high at 5:30 am of 2.78%. The 7-10 Year US Treasury Index we use to hedge stock market risk is down .65% from yesterday.
It will be said over and over today that markets don’t like uncertainty, and Mr. Trump brings plenty of policy uncertainty as well as a distinct uncertainty of temperament. We will learn more about both in the coming days.
We already know the basics of his significant policies: He promises to cut taxes, re-negotiate trade agreements, repeal Obamacare, reduce regulations, and reform immigration. But he cannot enact these measures alone. He must build coalitions in an ideologically diverse Senate and House.
To accomplish anything, Mr. Trump will need to work and compromise in a Congress where there remain very few moderates left standing. The poles could not be further apart – from Bernie Sanders’ energized young left to Paul Ryan’s fight to keep conservatism relevant. Few if any of Mr. Trump’s legislative measures are likely to pass without significant compromise. But isn’t that the beauty of the American system of government?
If Mr. Trump’s negotiating and deal-making skills prove as good as he says they are, maybe, just maybe, Congress can begin getting some things done to grow our economy, rebuild our manufacturing base to provide a much broader skill-range of jobs, unleash small business, improve our security, rebuild our rotting infrastructure, and here’s a big one – begin to stem the incredible growth of our national debt.
Fully half of this country is deeply hurt this morning and the other half is jubilant. It cannot be overstated how big a sea-change this election is from what just yesterday we accepted as status quo. Citizens, bosses, ambassadors, heads-of-state, generals, CEOs, Fed board members, and government workers will all be coming to grips with what the new order will mean for each of our futures and how we work together from here.
The next few days will tell a lot. As Mr. Trump announces his transition team and Congressional leaders begin floating legislative goals, even as Mr. Trump addresses a media he excoriated during the election and those who voted passionately against him, we will gain insights into what the next four years will look like. We choose to hope for the best, but remain vigilant. Please do not hesitate to call us with any concerns or questions.