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Dow closes near record high as Trump’s victory spurs growth bets

Traders watch as Hillary Clinton addresses her staff and supporters about the results of the U.S. election, on the floor of the New York Stock Exchange (NYSE) the morning after the U.S. presidential election in Nov. 9.

BRENDAN MCDERMID/REUTERS

U.S. stocks and the U.S. dollar rose as heavily hedged markets bounced back from the worst selling in four months amid speculation Donald Trump and a Republican-controlled Congress will pursue business-friendly policies.

Following a rout in equity futures overnight, the Dow Jones Industrial Average came close to finishing at an all-time closing high and the S&P 500 Index rebounded as waning concern over stronger regulatory scrutiny spurred rallies in drugmakers and banks. Treasury yields topped 2 per cent on wagers the Republican will ramp up spending. The greenback rose the most since the day after Brexit, Mexico's peso sank amid prospects the integration with the U.S. will unravel, while the yen erased gains. Russian shares bucked a rout in emerging markets on speculation the new government will mend ties with Moscow.

A Trump victory had been portrayed by analysts as having the potential to unhinge markets banking on a continuation of policies that coincided with the second-longest bull market in S&P 500 history. Going into the vote, most polls showed Democrat Hillary Clinton ahead. The Republican has pledged to clamp down on immigration to the U.S. and renegotiate free-trade agreements. In his victory speech, he pledged to focus on rebuilding U.S. infrastructure.

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"Our base case is we're more likely to see a more moderate president than we saw as a candidate and the market's agreeing with that," said Lowell Yura, head of multi-asset solutions for BMO Global Asset Management in Chicago, which oversees $238-billion. "We don't see a huge impact to short-term earnings and short-term economic growth."

In New York, U.S. stocks rebounded as traders shrugged off the jitters that followed Trump's victory. The S&P 500 rose 1.1 per cent to 2,163.20 after futures contracts tumbled as much as 5 per cent overnight. The Dow Jones industrial average was up 1.39 per cent, to 18,588.35 after briefly flirting with its all-time closing high set in August of 18,363.05. Nasdaq Composite added 1.11 per cent, to 5,251.07.

"We expect the equity market response to the election result will be limited," David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc. "The U.S. economy has been expanding for seven years and continues to grow at a subdued pace. We expect the U.S. stock market will climb slowly during the next few years in line with earnings growth."

Canadian stocks edged higher, with energy stocks gaining amid speculation Mr. Trump would buoy Canada's beleaguered oil industry while investors piled into gold amid uncertainty over his policies from trade to foreign relations.

The S&P/TSX Composite Index added 0.7 per cent to 14,759.91 in Toronto on Wednesday, joining U.S. stocks in rising after the Republican's stunning election upset on Tuesday night. Precision Drilling Corp. rose 4.9 per cent, Crew Energy Inc. gained 4.8 per cent and TransCanada Corp. rose 3 per cent on hopes Mr. Trump would move to approve the company's Keystone XL pipeline from the oil sands to the U.S. Gulf Coast.

"Keystone looks like a key positive, if that gets re-opened that's a benefit for the oil and gas sector which frankly needs a lifeline given how tough the fundamentals have been," said Stephen Lingard, portfolio manager with Franklin Templeton Solutions, a unit of Franklin Templeton Investments. Mr. Lingard and his team oversee $9.5-billion in Canada while the firm manages $733-billion globally.

"I'm surprised volatility isn't higher," Mr. Lingard said. "I do think a lot of his initial message on being very conciliatory, more statesman-like than populous has played a role in this fairly muted market reaction. You didn't know which Trump would show up."

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Raw-materials producers jumped 3.4 per cent as a group as gold surged overnight the most since Britain's Brexit vote in June, before paring gains. HudBay Minerals Inc., which produces zinc and copper, rose 4.2 per cent as industrial metals also advanced.

"The gold guys will love this," Paul Conibear, chief executive officer, Lundin Mining Corp, said in a phone interview. "Gold historically has already worked best as a safe haven when there's uncertainty on the U.S. dollar, uncertainty on world economies."

Still, Mr. Trump also campaigned on a pledge to renegotiate or potentially end the North American Free Trade Agreement, a pact that has existed between Canada, the U.S. and Mexico since 1994 and has been a boon to the Canadian economy.

Companies that derive a significant revenue from south of the border declined, including auto-parts supplier Magna International Inc. which fell 3.9 per cent and West Fraser Timber Co., which got 55 per cent of its revenue from the U.S. in 2015, fell 6.6 per cent.

Pledges by Mr. Trump in his victory speech that he would forge strong relations with other big nations helped ease some concerns about heavy tariffs being slapped on imports to the United States and a starkly more aggressive geopolitical attitude.

But emerging markets bore the brunt of the Republican nominee's victory, with Mexico's peso still down 8.7 per cent after falling more than 13 per cent to hit a record low overnight.

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European stocks closed up 1.6 per cent after having fallen as much as 2.3 per cent. MSCI's broadest index of Asia-Pacific stocks outside Japan had ended down 2.3 per cent and Tokyo's Nikkei closed down 5.4 per cent.

In commodity markets, copper for three-month delivery touched a 15-month high before trading up 3.3 per cent at $5,407.5 a metric ton on the London Metal Exchange.

Gold was little changed, after rising earlier as Mr. Trump's win promises to reshape the relationship of the U.S. with the world, and the potential for unpredictability in American policy fuels speculation that the Fed will delay raising interest rates..

Oil prices edged higher on Wednesday as stocks and the dollar bounced back from a huge early slide.

Crude oil prices tumbled as much as 4.0 per cent to near $43 a barrel, a near two-month low, late Tuesday night as it became clear U.S. voters picked Mr. Trump as their next president.

Brent futures rose 32 cents, or 0.7 per cent, to settle at $46.36 a barrel, while U.S. crude gained 29 cents, or 0.6 per cent, to settle at $45.27 per barrel.

"If you just look at today's close versus yesterday's close, not that much happened. But, there was a near $2 a barrel roller coaster ride in the middle," said James Williams, president of energy consultant WTRG Economics in Arkansas.

"Oil markets started to recover from their overnight lows once it became clear that Trump had won the election," Mr. Williams noted.

With files from Reuters

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