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Is Wall Street Afraid of Donald Trump?


Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, Nov. 7, 2016.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, Nov. 7, 2016.

Are financial markets worried about a Donald Trump presidency? Well, in a word, yes. But it’s not quite as simple as you would imagine.

Bankrate.com senior analyst Mark Hamrick said it’s not that Wall Street prefers one candidate over the other, it’s because markets don’t like big sudden changes.

“The tremendous uncertainty associated with a Donald Trump election win would more than likely roil markets,” said Hamrick.

Wall Street had been on a nine-day losing streak since October 28 when FBI Director James Comey upended the presidential election by telling members of Congress the agency was reopening the investigation into her emails October 28th. But that changed Monday.

The all-clear signal from the FBI Director Sunday — clearing Clinton of any criminal wrongdoing, and thereby improving her chances of winning November 8, helped boost equity prices across the board. As of mid-day all three major Wall Street indexes were up about two percent.

But even as Wall Street appeared ready to price-in a win for Hillary Clinton on the eve of the US election, Hamrick noted the stock rally has nothing to do with partisan politics.

“It’s about maintaining the status quo," he said.

Wall Street prefers the divided climate in Washington, for example, because the political checks and balances mean fewer regulatory surprises.

Hamrick said something that could upset investors would be if Democrats swept the down ballot races too. So while a Hillary Clinton win wouldn't frazzle Wall Street, "the Democrats taking the Senate and of course a total sweep" [in the House of Representatives] could be "problematic," Hamrick said.

While the total sweep that Hamrick suggests is highly unlikely, he said such an outcome would create volatility that could roil markets for days.

But aside from the politics, a steady and stable employment picture also helps keep investors grounded.

PNC Financial Services chief economist Gus Faucher said the last jobs report before Americans head to the polls, which showed employers added 161,000 workers into the payrolls, was a solid “status quo” report and was unlikely to shift votes one way or another.

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