What Trump’s win means for markets and portfolios
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The markets are reacting forcefully to Donald Trump's victory in the US presidential election. US stocks, bond yields, and the US dollar are all rising sharply in Wednesday trading. But will these moves have legs? And what medium and longer term market implications could this election outcome have? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Today, I'm sitting down with Christian Mueller Glissmann, head of asset allocation research in Goldman Sachs Research, and Brian Garrett, who oversees equity execution on our cross asset sales desk in Goldman Sachs Global Banking and Markets. C
you very much. Glad to be here. Yes.
And, Brian, you've been up since the wee hours of the morning. Christian, you are in London, so you had the benefit of the time change, but we've all been up a lot overnight watching these markets, which, as I've just said, are reacting quite strongly to Donald Trump's victory. We've seen these so called Trump trades that we've been talking about for a long time now really taking off. So, Brian, talk us through the flows that you are seeing today and how much further you think these trades can run because they've already run quite a lot.
I think coming into today, clients were underweight risk on where they wanted to be, especially in the event of the Trump potential red sweep. If we were to handicap it, clients were probably running at a 5 out of 10 in terms of positioning. We've seen clients engage on trades that worked following the 2016 election, which were long banks, long technology, long energy stocks. And if you look at 2016 as a playbook, the market rallied 2% the day after the election. And between mid November mid December in 2016, we rallied another 3 and a half percent, which, given where S&P is right now, would p
But is the 2016 playbook the right playbook? Because it feels very different this time around. In 2016, Trump was a big surprise, but markets were largely expecting this result if you look at prediction markets and the other gauges. So is that the right playbook? Because things have already been priced in to some extent. I
think to some extent is the right way to frame it. You're seeing the 10 year interest rate up 20 basis points today roughly. And so I agree that we're coming into 2,024 at a different rate environment, and equities are obviously at a different multiple. But I think that the idea of continuation of tax cuts, the idea of more beneficial m and a environment, and the idea of less regulation on banks, a lot of these themes will work in 2024.
Is there anything unexpected you've seen today about the price action? So,
I mean, definitely a surprise in the renewable energy space. You know, you've got some of these names that are down 15 to 20% just on the fact that we could see changes to the IRA, which would have an impact on their earnings per share and and their ability to generate revenue. One of the other things that I think was pretty surprising is the move in the VIX. The market had started to build in this you have election day, and then you maybe have 2 or 3 days of discovery where you don't know the outcome of the election. I don't think many people had it in their playbook that you we would know th
And, Krish, listening to everything that Brian's saying right now, is that what you are generally observing from your seat across the pond? Yeah.
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