This week marked one of the wildest and highest-volume trading periods in US history, with booms and busts surrounding Tuesday night’s election results.
In the first few hours of vote counts, Wall Street boomed on the expectation that Hilary Clinton had strong results in exit polling, which was followed by a fierce collapse in stocks and explosion in gold once early vote tallies showed an extremely close race. Late Tuesday night, before any swing states had been called, Dow futures were down nearly 900 points, while gold was up a whopping $64 per ounce.
Once Donald Trump’s Electoral College win became clearer overnight, equity markets recovered from their panic drop, but still reflected a pessimistic economic outlook. But, by midday Wednesday traders began to find optimism as they reassessed President-elect Trumps economic policy plans; stocks rose sharply as gold made new lows.
This week's wild ride left many investors wondering if this may be just the beginning of a rougher ride ahead.
Infrastructure Plans BoostCopper
One of the biggest winners this week was copper, a metal that is closely associated with economic growth, as it is an essential component in construction and manufacturing. The red metal exploded higher, gaining over 40 cents per pound (+10%) on expectations that Trump’s economic plans will result in stimulus and infrastructure spending.
Similar expectations for more construction helped boost lumber, steel, and aluminum markets, as well as the stock market as a whole. Stocks were also boosted by an expectation for lower taxes and less regulation of the health, banking, and energy sectors.
Crude Oil under Pressure
The potential for loosened environmental regulations was a boon to energy producing companies that may be able to drill for oil and gas more easily and refine those fuels into gasoline and diesel fuel with fewer barriers. Though these companies’ stock prices rallied, this expectation knocked energy futures markets lower during the week.
Meanwhile, the International Energy Agency announced that global oil production is rising, and that OPEC is producing petroleum at a record pace, despite recent vows to reduce production.
Exports in Question
President-elect Trump’s criticisms of trade agreements were a central part of his candidacy, leading many to expect that there will be increased trade barriers over the next four years.
This could hurt US exporters, especially if other countries respond with similar measures, sparking trade and tariff wars. These concerns are weighing heavily on the agricultural sector, which accounts for 10% of all US exports. If China, Mexico, the EU and other major trade partners buy less soybeans, wheat, corn and livestock from the US, our farmers could see a sharp decline in revenue.
Corn, wheat and soybeans tumbled to the lowest price in weeks with a weak finish on Friday.