Equity markets to recover post-election

Equity markets will recover after the US Presidential Election result, according investment house, Instreet Investment.

Instreet Investment managing director, George Lucas, said the market was expecting a five to 10 per cent sell off knee jerk reaction if Trump won, while US markets would recover the three per cent that they lost, if Clinton won. However, that was dependent on who would win the Senate and the House.

Although Asian markets would be the first to respond to the US Presidential Election result, they may have closed before a result would be known, Lucas said.

"If you're a Trump hater, beware — this election is too close to call and the relatively high proportion of undecided voters, along with the historically high disapproval ratings for both candidates, means it could go either way. Clinton appears to hold a slim lead but it's within a margin of error," Lucas said.

However, if Trump wins the election, there would be little excuse for the US Federal Reserve (The Fed), not to hike interest rates in December, particularly amid recent strong data, Lucas added.

The last couple of weeks had already been miserable for Australian and global investors, as market participants feared Trump would win the election, he said.

"The S&P500 has shed about three per cent over the past nine trading days; the ASX200 has shed 4.6 per cent over the last two weeks; whilst the pan-European Stoxx 600 index fell to its lowest point since early July. In Japan, the Nikkei 225 dropped 3.1 per cent last week — its worst drop in four months. Not helping the situation was a sell-off in oil and weak US employment data."

As that happened, the US money market fund (a proxy for cash) absorbed more than $36 billion in the week to 2 November, as investors looked for safer assets, he said.

"Investors also scrambled for ‘core' government bonds, gold and the Yen."