National stock indexes have seen a rubbery few weeks in light of the uncertain nature of the presidential election.
Two major stock indices that analysts pay attention to, the S&P 500 and the Dow Jones Industrial Average, both took large dips on Nov. 4, the Friday before the election. The S&P 500 is an index of the earnings of the 500 largest companies in the nation, and the Dow Jones is an index of thirty large companies in the nation. These and other stock market indices are used as a litmus test to gauge the economic health of the nation.
The Friday before the election, the S&P closed at 2,085, more than 50 points lower than the previous week. Dips in the market are not unusual, and are quite common, with the market closing at 1,864 in February of this year.
The latest slip, however, has a more immediate cause. This presidential election, which has proved to be one of the more uncertain in recent memory, had left stock brokers with a sense of uncertainty, which proves to be poisonous in the markets. According to the Wall Street Journal, “Uncertainty has the potential to restrain consumer spending and business investment, if people and businesses have significant questions about the taxes and regulations they will face down the road.”
Joe Walenciak, professor of business and dean of the Soderquist College of Business at John Brown University, agreed that the election made traders and analysts think twice. “Uncertainty is a big thing,” Walenciak said. “I think they didn’t know how to react the evening of the election. The polls all indicated a different result from what we got.”
“Everyone, including Donald Trump was surprised by what was happening. I don’t think he believed it was going to happen, despite all the bravado. For a moment, things reflected that uncertainty, but by morning the markets came back up,” Walenciak said.
While the markets showed a slip before the election, there has been steady growth in all the markets following the election. The S&P 500 has shown a growth from 2,084 on Nov 4, to 2,213 on Nov 25, after Trump’s election. The same is true of the Dow Jones and other stock indices, and all show no signs of degradation.
Sam Heinrich, associate professor of business at JBU, said that Trump’s protectionist policies lend toward market stability in the nation. “The interesting thing is, if you look today, the Dow Jones has broken through to an all time high, so the markets are doing quite well right now, and were doing so even the day after the election.”
“In the futures market, however, we see about an 800 point fall at around 8:00 p.m. the night of the election. This is when we realized that, oh, Trump might win the election,” Heinrich said, “and some people have looked at that and said that Wall Street doesn’t like Trump, but that’s a flawed interpretation. Most of Trump’s policies are pro-business, and they would lead to greater profits.”
“Uncertainty makes investors nervous, and when investors get nervous, they tend toward liquidity, toward the exits. It was such a short blip, and it turned around pretty quickly,” Heinrich said.