What could happen to the stock market if Trump wins
Wall Street is coming to terms with the fear that Donald Trump could win the presidential election, and it might not be a good look for stocks if he does. Here’s how the stock market could respond if Trump is elected, according to two economics professors: http://cnb.cx/2eD3DYH
- 1.Immediate sell-off“If we were to go in 70/30 [for Clinton], and we think the market is 10 percent higher under Clinton than Trump, if Clinton wins it should be up about 3 percent and if Trump wins, it should go down 7 percent," said Eric Zitzewitz, economics professor at Dartmouth College. Strategists agree there would be a sell-off with a Trump win, but then the views diverge on how the market would trade after that.
- 2.L-shaped move in the equity marketEthan Harris, head of global economics at Bank of America Merrill Lynch, said he would expect a sell-off if Trump wins, then an L-shaped move in the equity market, because of the period of policy uncertainty. "From the action in the stock market, the equity market is worried about a Trump victory, about the uncertainty of policy under Trump,” he said, adding, "In this election, I think the dominant story is about uncertainty after the election, and a status quo election means no shock."
- 3.V-shaped move in the equity marketBruce Bittles, chief investment strategist at Baird, has a different view and he believes a Trump victory could result in a V-shaped move in the market, as Wall Street reflects later on positive tax changes and the looser regulatory environment Trump supports. "What I think happens is we get a repeat of what happened after Brexit. The market initially goes down and then goes up," he said.