The banks: If Donald J. Trump becomes President-elect, markets will fare worse than in the wake of Brexit, the biggest global stock market loss in history.
“We believe that if Trump wins, markets are likely to fall further- one should not use the Brexit template where stocks bounced quickly,” a JPMorgan note states.
Keith Parker, global equity strategist, believes the S&P 500 might decrease 11 to 13 percent if Trump wins the election. The index might rise 2 to 3% he wrote:
“We see the U.S. election as first: a risk-off/on event initially that has the greatest effect on equities/rates given the uncertainty,” he said. “Second, a macro event that (affects) currencies and to a lesser extent commodities; lastly, a micro event that (affects) a number of industries but one that will play out over time as agendas are implemented.”
Citi: “The tail risks of a Trump victory or a Democratic ‘sweep’ could result in a market correction in the 5 percent range (similar to Brexit), after which the investment community reassess the environment,” Chief U.S. Equity Strategist Tobias Levkovich wrote in a note.
Goldman Sachs echoed the sentiment: “Our central election expectation continues to be that Sec. Clinton wins the White House, with a slim Democratic majority in the Senate – quite possibly a 50-50 split with the vice president breaking the tie…” The note stated things were essentially too close to know the turnout.
During the month of June, in which Brexit shook financial markets and cast a shadow over future possibilities, the gold price increased from approximately $1,240 to $,1340.
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The stock market crash in the wake of Brexit wiped out $2 trillion in wealth, according to CNN. The amount wiped out after U.S. Congress voted down the Wall Street bailout on September 29, 2008 was $1.9 trillion.
“Brexit is an immensely complicated problem with effects on the political, economic and financial environment,” wrote David Kelly, chief global strategist at JPMorgan Funds.
Many have compared a possible Donald Trump Presidency to a “Brexit II.” Indeed, there is populist sentiment spanning the globe, and the most recent example thereof is in Iceland, where the Pirate Party there gained thirteen seats in a recent vote. Brexit, furthermore, increased antagonisms within the European Union, with France demanding negotiations take place in French and even honing in on Britain’s fintech industry.
CNBC reported Monday that “major Wall Street analysts” Monday markets would sell off were Donald Trump elected President of the United States.
While it noted most believe Ms. Clinton would be elected president, analysts expressed that traders might be wrong, just as they were leading up to Brexit, whereafter the S&P 500 decreased 5%. It recovered.
The S&P 500 nine day losing streak through Friday was a first since 1980, when gold broke records approaching $900 an ounce. Silver increased to $50 an ounce. Over that span, the S&P 500 decreased 3%.