Post-Election Meltdown

On Tuesday evening, not only did the world witness a stunning and historic presidential election, we also witnessed a stunning and historic market reaction.  Safe to say that when voting started on Tuesday, expectations were set for some overnight volatility during the 2016 Presidential Election decision, but was anyone really prepared for what happened after the exit polls? News media stations were comparing it to another Brexit.

During the evening , the S&P 500 stock index futures market went from up 17 points to down 107 points; a 124 point swing, in a matter of 3 ½ hours.  That is a $7,787.50 move on one single contract.  This near 6% drop actually caused circuit breakers to halt the market in a limit down move.  In fact, all of the stock index futures markets experienced the same type of move in the same amount of time.  Markets were in a complete tailspin until about 3 am CST when finally, Donald Trump was declared the next U.S. President. As he delivered his acceptance speech, markets were absolved of their uncertainty, and took a breather.

Before the outcome was announced, the stock index futures markets were not the only asset class experiencing heavy trading volume and ranges.  Interest rates, metals, and currencies all got their fair share of action during that same time period.  The 30 year bond futures plummeted 3.5%, gold spiked almost 4% and the US dollar index dropped 1.5%. This event was heard, seen and traded around the world.

Regardless of your political choice, you may have felt pain in your trading portfolio last night, or felt helpless about the final result.  However, there is near 24 hour access to the markets through futures trading.  This gives traders the opportunity to establish new positions, hedge portfolios, or even scalp the massive overnight ranges.  Much like Brexit, the majority of the violent market moves linked to the U.S. election happened overnight.  By the time equity traders got to work Wednesday morning, the market had significantly changed.  This is often the case during major world events, whether anticipated or not.

This particular world event, although expected to move markets, was amplified beyond prediction.  Surprisingly though, if you were just waking up at the end of this post-election day, you may have not even noticed the bloodshed.  Shockingly, it resulted in a huge buying opportunity.  Both the stock index futures and the US dollar index made peaceful transitions to erase all the overnight losses, and astonishingly, to close at session highs of the day.  Nothing short of amazing.  It’s almost as if it were all a dream.

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