Reconciliation and Relief Spurs Market Rally in the Wake of Donald Trump Win

Stock traders follow stock prices at the New York Stock Exchange, Friday, Jan. 15, 2016. (AP Photo/Mark Lennihan)
Stock traders follow stock prices at the New York Stock Exchange, Friday, Jan. 15, 2016. (AP Photo/Mark Lennihan)


(ABC News) — A day of conciliatory rhetoric and seeming goodwill led markets to rally to near-record levels today, less than 24 hours after being thrown into disarray over an unexpected election outcome.

The Dow Jones Industrial Average closed near an all-time high, with defense, steel, pharmaceutical and private prison companies posting gains, among others.

The closing bell capped off a day of relative stability after a night of tumult brought by an election result that investors had not expected. As ballot results trickled in on Tuesday night, markets began a massive sell-off, which at one point saw Dow futures trading down more than 800 points — a decline not seen since some of the darkest days of the financial crisis of 2008.

But while futures had pared their losses ahead of trading this morning, U.S. markets gently bounced between positive and negative territory for a few hours at the open before launching into a steady rally throughout the day.

As the political world watched Hillary Clinton deliver a formal concession speech and President Obama pledge a “successful transition between our presidencies,” U.S. markets climbed steadily.

“Markets aren’t necessarily rallying because Trump won; stocks are moving higher because the American political system has proven itself in the face of a lot of skepticism and fear,” Nick Colas, chief market strategist at Convergex, told ABC News in an email. “The consensus here is that today has been remarkably smooth as compared to the incredibly fractious nature of the campaign.”

“Trump wins, Republicans vow to work with him, Clinton concedes publicly, President Obama invites the winner to the White House. Everything happened as it always has during other changes of power,” Colas explained.

In the same vein, U.S. Bank Senior Investment Strategist Robert Haworth told ABC News that he believed it was “a bit of a ‘relief rally’ in that investors can put the election uncertainty behind them.”

He explained that “some of the big moves today are in specific industries that are rebounding since investors had sold them in anticipation of Clinton winning the election.”

The movement in the markets was similar to that seen after the shock of the “Brexit” vote by the United Kingdom in late June to leave the European Union.

“An event surprises investors, who had positioned for the wrong outcome,” explained Paul Christopher, Head Global Market Strategist at Wells Fargo Investment Institute. “After some period of initial overreaction, investors step in to buy the pullback.”

“That happened within two days of the Brexit referendum and seems to be happening even faster here,” he added.

But Christopher said that there was still room for volatility in the coming days and weeks.

“We don’t view Brexit and Trump’s win as perfectly parallel, but there are some echoes,” he said. “We believe the U.S. markets could still be caught off guard if the president-elect at some point stirs up concerns that the market had relegated to the future.”

He cited the hypotheticals of Trump strongly reiterating trade restrictions, outlining proposals that could jack up the federal debt, or threatening deportations of undocumented immigrants as scenarios that could spook markets.

While U.S. equities enjoyed gains, the Mexican peso — an asset that has attained nothing short of celebrity status for its hyper-sensitivity to the twists and turns of this election cycle — had barely made up massive losses it racked up on Tuesday night.

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