Sitting in a media green room shortly before midnight on the evening of the election, I queried Google for a quick check on global markets and was shocked by the rapid decline. Whoa! From Asia to the US, markets were tanking terribly. The Nikkei, the Hang Seng, futures on the Dow and NASDAQ were all down between 3.8 and 4.8 percent. Investors were bailing from their positions, some desperately seeking safe havens, amidst early signs that the unexpected election of Donald Trump as the next President of the United States was becoming a reality. Gold, U.S. bonds and the dollar all gained ground as better bets. The Peso plummeted in response to visions of the overnight construction of a towering wall on the U.S.-Mexico border. As the election results were tallied, markets dove deeper.
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Within a few hours, like the proverbial phoenix emerging from the ashes of a scorched earth campaign; a solemn and earnest Donald Trump appeared before supporters confirming a Fox News report that Secretary Hillary Clinton had called to concede. He appeared uncharacteristically presidential. Some even perceived grace; others humility, sincerity, and gratitude. Gone for the moment was the vitriolic and vulgar rhetoric with which he had teetered his campaign on the precipice of self-destruction.
The change in his tone and demeanor was striking. The markets slowed as traders watched and listened, taking note. And in that moment, they did an abrupt about-face. The exchange venues from Chicago to Shanghai didn’t miss a beat as professional market makers helped ensure all bids and offers had an opposite side. The market course changed with the man. In fact, for the day following through the end of the week, many markets rallied. The Dow and S&P 500 were up four consecutive trading sessions, with the Dow on track for the best week in five years and NASDAQ’s best week since October of 2014. The Nikkei hit a nine month high.
The question now is this: Can the President-elect’s Jekyll and Hyde “change” continue and do some longer-term good for our economy and country?
Traders prefer conviction over unpredictability. Mr. Trump, with his not-so-apparent policy positions on financial and economic matters was anything but clear, concise and calming. His shoot-from-the-hip style, and occasional eruptions, rattled professional traders and average investors alike. Conversely, while many traders and investors didn’t agree with Secretary Clinton’s positions on some issues, they knew what they were. She was a known quantity and her stability inspired confidence, in contrast to the chaos often injected by both her opponent and a few of his surrogates. Given the months of polling and pundit projections predicting a Clinton win, markets got spooked and panicked with the possibility of an upset. When Mr. Trump morphed from a mud and gun slinging politician to a potentially proficient and professional appearing President-elect, the markets took immediate note and responded favorably.
For those of us who watch markets all the time, the overriding unanswered question is whether Mr. Trump can continue creating confidence that will resonate in markets and reciprocally throughout the economy. Of course that confidence will require far more than simply his appearance and words. It will be built by the decisions he makes in the coming days and weeks, constructed by the quality and diversity of the experts and professionals with which he surrounds himself. It will be dependent upon key cabinet picks, particularly Secretary of Treasury, State, Defense, and Attorney General. It will also be contingent upon the policy proposals and priorities that survive after months of charged rhetoric and promises. Will he really try to back out of trade or nuclear development deals, pull back support for the North Atlantic Treaty Organization, get rid of gun-free zones in schools on day one, target and kill the relatives of terrorists or ban certain Muslims from entering the country? Will he really try to repeal prudent protections put in place as a result of unregulated financial markets that sent our country into the economic gutter and caused the Great Recession? This is an assurance to the millions of middle class, blue collar workers who put him in office, really?
At the same time, can he produce the jobs, infrastructure investment and tax reforms he has promised? It certainly remains to be seen.
All of that matters, but his words, his tone, tenor and temper will matter the most. If he reverts to appearing unbridled and unhinged, markets and our economy could go south (and not to Mexico) in a huge hurry.
The good news is President Trump will have a decent starting position on an inside track. Mr. Obama, when he became President, was dealt unemployment rates of 10 percent and Gross Domestic Product (GDP) in negative territory (the lowest low was 8.2 percent). Contrast that to where Mr. Trump begins: GDP more than doubled recently from the second to third quarters (1.4 to 2.9 percent, respectively). And while there are inconsistent urban and rural economic divides, the nation in aggregate has enjoyed 88 continuous months of growth—the fourth longest economic expansion since 1854. We’ve had 87 continuous weeks of less than 300,000 jobless claims (the 60-year average is 358,000). The unemployment rate has remained steady at around 5 percent for over a year (it currently stands at 4.9 percent). And energy costs for businesses and families that rely heavily upon transportation remain relatively low. The average cost of a gallon of regular gasoline is now only $2.18. In fact, last year, each U.S. driver saved $540 due to reduced fuel costs. Plus, low home mortgage interest rates are enabling millions to buy, keep and improve their homes and communities.
All of that said, economically speaking, things could certainly be much better. Mr. Trump has said he will make it so. We should all wish him well on that quest. The focus of the entire world and markets is beamed in on our new leader. The gravity of this pivotal moment in history is hopefully matched by the President-elect’s competitive nature, strong work ethic and unquenchable desire to succeed in his most important endeavor ever. To “win” at the presidency mandates sturdy and stable leadership from President Trump (no more bizarre 3 a.m. tweets. No embarrassing international incidents). If he can pull off this change—this monumental metamorphosis—perhaps our economy and our country will be better off. Perhaps this change can do us good.
Former US Trading Commissioner Bart Chilton is a financial and political commentator and consultant, and the author of Ponzimonium: How Scam Artists Are Ripping Off America. He can be reached at firstname.lastname@example.org.