As the victory of Donald Trump took shape last night, futures on the various stock markets began to plunge. S&P 500 futures were down the unofficial limit of 4% at one point. The Japanese Nikkei 225 Index closed down about 920 points overnight.
The theory was that President Trump would be bad for the US Economy, not the least by pressuring the FED to normalize (raise) interest rates. And, indeed, we see 30 year Treasuries now yielding around 2.84% – up almost a full quarter point from yesterday (see http://finance.yahoo.com/bonds/composite_bond_rates?bypass=true).
Amazingly, however, US stocks have staged a major turnaround. From the overnight low, the Dow has recovered its over 750 point loss, plus it has tacked on another 230 point gain. If I were a suspicious man (I am), I would suggest that the FED and US Treasury (The Plunge Protection Team) once again are bailing out the Titans of Wall Street.
While President Trump is unlikely to worry about this activity, if I were President, I would initiate an investigation to see if there was market manipulation by the Treasury and the FED. Continued manipulation of stock prices subverts the very nature of stock markets, and has caused a major bubble in equities.
I wouldn’t doubt that they are trying to delay the popping of the stock bubble until Mr Trump takes office so that he can take the fall for the fall.