The Election and the Overall Market

So That Happened.

Apparently my gut doesn’t like me as much as I thought. I first thought Brexit would have never passed, and before this morning, I was certain Hillary Clinton was going to be the next president of the United States – and had been sure of this for years. That said, we are here to talk about the implications this event has on the markets overall today, tomorrow, and for the next four years.

Without looking at the dates, can you see where the Brexit decision was made? What about the time that led up to the election?

Even though the world was almost certain that Brexit was going to destroy the world economy, it just hasn’t happened. Honestly, the US markets have grown by a significant amount (12%) since Brexit passed. And, like Brexit, many analysts and investors were calling for the end of the world when President-elect Donald Trump won this past Tuesday, but all the market has done so far this week is go up.

Rationally, these two events are completely different. One has a long-run effect on the United States -British trade relations, while the other is a more immediate change. So, in order to get a better idea of what this election will do to the United States, let’s take a look at the economic state of Britain – starting with the GBP/USD.,

Over the past few months the GBP has collapsed in value compared to the dollar, beginning the day Brexit was passed, and losing 16% of its value since then. That being said, there hasn’t been a similar change in the USD. Yes, there was a significant drop in the Value of the USD on Wednesday after the election, but that was quickly corrected.

Long term, the GBP has fallen, what about the standard FTSE 100 Index which is comparable to our Dow Jones in terms of analyzing the public markets within that region.

Much to my personal surprise, not only has the United States market had significant gains since the passing of Brexit, so has the European market, the FTSE gaining 7.78% in these past few months, despite the decision.

If the overall market was hurt by Brexit, maybe individual industries were decimated.

In June 2016, the majority of industries were down, but the industries that were hit significantly were:

· Drug Manufacturing

· Life Insurance

· Insurance

· Employment Services

· And Transportation Services

All of which are industries that aren’t really correlated to economic distress thanks to Brexit passing.

What is interesting is that, in that month, metals and mining went up 23.93% a spike that may be correlated. However, the next month almost every industry bounced back from their previous losses.

Therefore, the fact that mining companies spiked on Wednesday at the market open is not that interesting to me.