The Trump Victory – How might investors react?

Without doubt, Trump's victory has been a surprise for markets and the pollsters. However, in the wake of the Brexit vote, and a closing in the US poll gap, investors had generally been hedging their bets and markets had already sold off significantly in the last 6-7 weeks coming up to this election.

There is evidence of a significant cash build-up in global portfolios, investor fear indices have been elevated and high (if not record volume) of US equity futures, and put to call ratios have set the scene for conservative biases going into this US election.

After an initial sharp sell-off, the local and Asian market reaction has recovered, with broad European and US equity markets actually rising last night. Some specific risk indicators, such as the US dollar versus the Yen and Swiss Franc and the Mexican peso, have understandably taken a more brutal price shock.

We would be surprised to see the New Zealand equity market weaken significantly in the near term, given the peak to trough fall of 13% in the last 6-7 weeks.