We asked traders what the Trump victory means for their market

November 14, 2016 • Reprints

Risk aversion swept across the financial markets during early trading on Nov. 9, after the unexpected Donald Trump presidential victory soured investor risk appetite.  With risk-off sentiment amid the Trump victory becoming a dominant theme across the board, stock markets could have been be left depressed for prolonged periods, but most markets seemed to have recovered by the following day. 

After the historic and unprecedented Nov. 8 election results, we decided it was time to reach out to our experts to ask for their opinion on what this Trump win means for stocks and other markets they trade and follow.

We asked traders, "What does the Trump victory mean for the markets you follow and how will those specific markets be affected in the near term (next 90 days)?"

Here's what they had to say...

Al Brooks @AlBrooksPA

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August was the 7th consecutive bull trend bar on the monthly E-mini S&P 500 chart. At the time, I wrote repeatedly that there have never been eight. Furthermore, every time there were seven, the E-mini corrected down 100 points over the next few months. I also wrote many times since the July rally that the E-mini had a 70% chance of closing the gap below the July 2015, 2-year trading range high before going much higher. It accomplished both in the past week.

I wrote that after the bears achieved their goals, the E-mini would probably test the all-time high. The reversal up on last night's election result is consistent with this

Finally, the E-mini monthly chart has been in a bull trend for about 100 bars. That is a long time. Therefore, the 2-year trading range will probably be the final bull flag in the 7-year bull trend. Hence, after a new high, the E-mini will probably correct down below 1800 during the next couple of years. Furthermore, it probably will test the double top around 1500 within a few years.

This has nothing to do with Trump. The market has been on this path before Trump announced and before he was elected. His election might change the speed of the process and the extent somewhat, but the market is telling us what it wants to do. It would not have mattered whether Clinton or Trump won.

Al Brooks, M.D., is author of the Brooks Trading Course and several books on Price action.

Carl Larry @oiloutlooks 

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Oh, this one Is going to set the record straight in the oil and gas markets. We can start with Trump’s aversion to the Muslim people.  That might bear some issue with oil imports into the U.S. from Middle Eastern countries (tariffs?). This would then lead to an increase in U.S. oil and gas production (incentives?). There’s also the play in between him and Putin (Russia backs away from OPEC?).

What happens in the next four years or possibly more, will shape the future of oil and gas in America.  We’re not even going to start with his disdain for climate change and the EPA.  We could see at a far-reaching possibility, the end of the ethanol mandate.  However, it plays out, what lies ahead for trading and hedging in oil markets is certain to be volatile with no clear path or direction ahead.

As far as the next 90 days play out, we’re all going to have to listen carefully to the way he starts to explain his energy policy, how closely he is going to stick to things he has said during his campaign and how the rest of the world is going to deal with the incoming President and his first foray into foreign affairs and commerce.

Carl Larry is a director and business development consultant for oil and gas at Frost & Sullivan. He provides daily oil market guesstimates with a dose of pop culture.

Alan Rohrbach @MacroMeister 

altTrump will be good for the economy and the markets.

The basic thought is that Donald Trump is the worst possible messenger for the far more constructive lower taxes and less regulation message. That was not just a variation on a theme...it was in stark contrast to what was being offered by the other side.

While many were allowing for an initial sharp downside equities reaction due to other, less friendly Trump trade and immigration pronouncements, it just is not the case. Maybe this is less shocking than many would think. The markets have the capacity to look past the immediate ‘received wisdom’ to reflect the intermediate-term outlook. In this instance it is possible they are coming to the conclusion on his more outlandish positions, “It ain’t ever going to happen.”

As far as immigration goes there may be some strengthening of the expulsion or incarceration of ‘illegals’ with bad criminal records (i.e. not including having entered the United States illegally.) Yet he’ll never implement his promise to deport all of the ‘undocumented immigrants’ that neither ever was realistic nor ever will be done.

Even the more Far-Right Republicans in the most heavily affected states have two reasons to not back that policy. The sheer cost of actually deporting 11 million people is Brobdingnagian, and they will neither be able to justify the cost nor support the social upheaval it would engender.

Aside from the specter of a "deportation squad" rounding up folks who are productive family members that in some cases have been here for many years, there is the extended economic cost. That includes the disruption to so many businesses that rely on those folks as their staff and even executives. The feedback from the constituents is going to be a very clear, “Don’t do it!” An extended path to legal status, even if that is short of full citizenship, will need to be established along with better border control measures.

And as far as his abrogation of trade agreements, that’s another non-starter. It is not within the President’s power to unilaterally cancel those arrangements. It requires confirmation by Congress, and once again the influence from the constituents on immigration policy applies to those trade agreements as well. While many old line industries and especially their workers (the core of Trump’s support) have suffered with NAFTA and other treaties, there are others who have benefitted.

So we will be thankfully left with the more constructive elements of his plans noted above, which are very good for the economy and the markets.

Alan Rohrbach is Lead Analyst and President of Rohr International, Inc. 

Matt Weller @MWellerFX 

Donald Trump's surprise ascent to the U.S. Presidency will no doubt have a dramatic impact on global markets for years to come, but the biggest initial effect is the so-called "reflation" trade. 

Trump didn't take long to express his plan to increase economic growth; at the very start of his acceptance speech, the new president-elect outlined a plan to expand fiscal stimulus: "We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We're going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it."

Many market participants have viewed fiscal stimulus as the "missing piece" to the economic puzzle, and the prospect of an injection of government spending into the economy has led to a dramatic reaction in markets.

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In simple terms, Trump's economic plan should drive inflation higher, leading to an increase in the value of the US dollar, higher bond yields, and an extension of the current market rally. In terms of specific sectors, materials, construction, and defense stocks are all poised to benefit in the weeks to come.

Matt Weller is Senior Technical Analyst for FaradayResearch. He has actively traded various financial instruments including stocks, options, and forex since 2005.

Rod David

My only fear is that he agrees to a financial transaction tax, which would kill market participation. Just seeming to accept it could trigger a broad exodus. Otherwise, I'm expecting volatility, seismic paradigm shifts, and heightened risk of gapping from one session to the next.

Volatility.

The maxim that "markets abhor the unknown" speaks more to stability than to trending. Borrowing from Reagan, a market is less fearful of what it doesn't know, and more fearful that much of what it does know is wrong. This is the unknown that leads markets to over-discount sentiment. An example of overly discounting pessimism is the proverbial "Wall of Worry" it creates, which is then climbed by a rally. Overly discounting optimism creates bubbles that pop.

Extreme discounting happens less often, and so do their bubbles and Walls of Worry, when opinion isn't able to become lopsided. Market participants are less able to discount their perceptions of a Trump administration, because of so much disinformation and omission about Trump's policies. Prices won't move very far or for very long before trying to trend in the opposite direction amid the "surprises" awaiting many of us.

Seismic paradigm shifts.

Was Brexit a harbinger of Trumpit, or was it a contributor? More likely, they're both part of a vicious cycle of grassroots uprisings spinning onto the western world's horizon. There were movements even before Britain's success. Trump would be hypocritical not to throw U.S. support behind initiatives that stick it to the elite. They don't all have to succeed—of those that even become referenda—for their potential effects on trade and economy to send shock waves through markets. With apologies to Lorenz's flapping butterfly wings, if that can contribute to a hurricane in the Atlantic, then brace yourself for what's coming between the North Atlantic and the Norwegian Sea.

Heightened risk of gapping.

Those seismic global paradigm shifts mean more global developments, which creates greater overnight volatility. I've already noticed it more frequently during the past year. This threatens U.S.-based daytraders because satisfying technical objectives overnight can leave the intraday crowd with only narrow ranging. Every market has a strategy, and some have multiple strategies, but there's not much you can do with a flat, horizontal line.

I haven't yet noticed an absolute decrease in the periods of significant intraday trending opportunities, just a relative decrease compared to increased overnight volatility. But I have noticed an increase in overnight Globex price action being responsive to Fibonacci extensions derived from intraday patterns. So, the more that targets of intraday accumulation and distribution are fulfilled overnight, the more potential for gapping between U.S. close and open.

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. 

Dan Gramza

I consider the presidential election an event fundamental. The expectation is that the market will absorb the event and continue in its original direction. Examples of this in the past have been the Swiss national Bank decoupling with the euro, the Brexit vote, China devaluing the yuan as shown on the daily charts. I do not think we would have seen so much volatility if Clinton won the presidential election because of the markets expectation of the continuation of current policies. The uncertainty of what a Trump election would mean to the market created the drop in the market and then the absorption of that reality and the continuation of an up move in the stock market is a typical behavior to a event driven market reaction. What is interesting, he needs to convince the Democrats and the Republicans who are not supporting him previously to support his upcoming policies. However, he is not beholden to anyone but it will be difficult for him to accomplish anything without a consensus.  It will also be interesting to see if he reverts to a plethora of presidential executive orders as used by the current administration.

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I follow the following sectors:

Stock Market: I am bullish on the stock market and I expect it to strengthen over the next 90 days.

Currencies: I am bullish on the dollar and I looked for it to strengthen over the next 90 days.

Interest rates: I am bearish on the U.S. yield curve. I’m looking for continued weakness in the 10-year notes in the 30-year bonds over the next 90 days.

Precious metals: I am looking for continued weakness in gold and silver over the next 90 days. This assumes that we do not have a major condition that creates enough uncertainty for capital flows back to these metals.

Base metal: I am bullish on copper for the next 90 days.

Crude oil: As I have mentioned in my free daily video at dangramza.com, the basic supply and demand dynamics is a dominant factor in this market. We have way too much supply for current demand. If the U.S. dollar does indeed remain strong, it will put additional downward pressure on crude oil prices. Even if there is a production agreement reached within OPEC, I do not believe that the individual countries will be able to maintain agreed production limits with the current economic situations with some OPEC members such as Venezuela.

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Natural gas: I am bearish on natural gas because of current supply and low demand. However, colder temperatures across the United States in the next 90 days could absorb the excess supply and push prices higher.

Agricultural: I am neutral to bearish on soybeans, corn and wheat. Current market conditions could create a sideways move for the next two months. I am looking for lower prices over the next 90 days.

Daniel Gramza is President of Gramza Capital Management Inc. and DMG Advisors, LLC.  He provides daily market updates from around the globe on subjects ranging from the Nasdaq and currencies to crude oil and grains. 

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