Emotional election uncertainty
In an early sign that investors were looking for a hedge for their funds in the wake of Donald Trump’s surprising victory in the U.S. presidential elections, the price of the digital currency Bitcoin spiked as the election results came in. The rise in Bitcoin pricing was part of an overall flux in the world’s economy. As futures on the Dow fell by nearly 800 points, coupled with the Standard and Poor’s 500 falling five percent, circuit breakers designed to halt trading during wild swings on the market were triggered.
Big spike and stability
Rising from a stagnant band of $700-710 earlier this month, prices spiked at $737.68 early on Wednesday, November 10th, and have stabilized at $712-$718 at the time of this writing, indicating a return to stability within the markets as the transition of power in the United States begins.
“Bitcoin is yet again acting as a form of digital gold and correlating strongly with the commodity – when there is uncertainty safe haven assets see a boost,” said Charles Hayter, CEO of Crypto Compare, speaking to CNBC. “As with Brexit, Bitcoin is seeing an upward jolt on the back of Trump’s election and the resultant lack of clarity on the global stage.”
Investment in secured assets as a safe-haven is a common investor behavior at election time.
Uncertainty is not an appreciated commodity in investing, and that is reflected in the stock market during election time. In the last year of George W. Bush’s presidency, markets fell by 41 percent. Investment in safe-haven items, such as the traditional metals markets of gold and silver, whose prices typically spike after a presidential election, in addition to new commodities such as Bitcoin, is common.
Holding out for certainty
However, while the Dow has fallen in three of the last four presidential elections on the day after Election Day, the markets revered their initial uncertainty by midday, leading to a rise of 256 points to 18,590, almost reaching its record closing price. The S&P 500 and NASDAQ followed suit, seeing a one percent increase on the day.
“Trump’s win heralds a period of greater uncertainty in US policy,” said Mark Haefele, global chief investment officer at UBS, speaking to Forbes. “His lack of governing experience, potential difficulties building relationships with congressional leaders, and inconsistent policy pronouncements during the race make it hard to predict his policy initiatives or his effectiveness in driving them through Congress.”
This was seen in the leaders on the day, with financial and energy stocks climbing sharply, on the belief that a Trump presidency would yield fewer industry regulations. Stocks that trade in clean energy and weapons manufacturing dropped precipitously, with the implications of a Trump presidency for their businesses unclear.