The Markets Are Afraid of Donald Trump

New York Times: “During the debate, the overnight futures markets rallied, raising the value of broad stock market gauges like the Standard & Poor’s 500-stock index by two-thirds to three-quarters of a percentage point. This was a consequential move, and because it was driven by the reduced chance of a Trump presidency, it reveals that the market believes that stocks would be worth more if he were to lose the election. Four pieces of evidence support this interpretation.”

“First, the rally played out in virtual lock step with Mr. Trump’s debate performance.”

“Second, the rally occurred between 9 and 11 p.m. on a Monday, typically a fairly tranquil time and, in this case, a stretch in which there was no other important economic or financial news.”

“Third, the rise in stock prices was unusually large for that particular time period — larger than during the same window on all but one of the 200 previous Mondays.”

“Finally, a particularly large rise in the value of the Mexican peso paralleled the rise in S.&P. 500 stock futures. The peso move, which appears to be linked to the reduced likelihood of Mr. Trump’s being able to put into effect his immigration and trade proposals, also suggests that the financial markets’ reaction was a judgment that Mr. Trump lost the debate.”

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