Local economist provides insight into market following election

Published 10:29 am Thursday, November 10, 2016


Throughout election night Tuesday, the sight of market numbers moving down to all-time lows were apparent.
Thomas Davis, Registered Investment Representative with Edward Jones Investments in Elizabethton, is no stranger to the market and added he’s received numerous calls throughout the day asking about what the status is for the economic future of the country.
With Hillary Clinton going in as a heavy favorite from media outlets and political organizations, numbers started to drift downward due to the unexpected, Davis said.
“I don’t like to predict things, but most importantly, understand the volatility after an election is common,” he explained. “It is expected and isn’t out of the ordinary. It doesn’t mean anything, one way or the other. A lot of folks consider it the market’s opinion of the outcome … the market didn’t like who got elected.”
Leading into Wednesday, stock numbers began to drift back to normal – also common in this situation, he said.
“In a lot of cases, especially with foreign investors who are not as familiar with an outsider like Donald Trump being elected, they become concerned,” Davis said. “And then you see what you saw last night. But as the rest of the world started to take in the news, and as the people of the United States started waking up in the morning and seeing the results and process everything … you saw the markets swing the other way. It’s not really a matter of confidence so much as it an unexpected outcome. They just weren’t ready for that to happen.”
According to information provided by Davis, since 1944, the stock market has declined 66 percent of the time the day after a presidential election, with an average decline of 0.75 percent.
“However, more often than not, the market was higher by the end of the year as well as six months later,” he added. “Two years after the election, stocks had risen by an average of 12.2 percent.”
While the future is uncertain, Davis added the historic trend of markets during these types of situation can be looked at positively.
“The next couple of weeks should be taken with a grain of salt,” Davis said. “It should be understood that this is common. This year there was particularly a little bit more but it corrected itself very quickly, which is a good sign. Going forward, historically we’ve seen that when a Republican is elected, the market twitters around for a little while. The market will have some volatility but then it trends upward. That’s historical. I would say what we’re going to see is a settling of everyone, getting out of election mode and getting back into business and holiday mode. Just back to life, really. I would tell people don’t worry, don’t panic by all means and if there are any questions, people need to contact their advisor. Don’t make decisions as a reaction.”

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