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Political news has always played a major role in financial markets: GDP, GNP, job reports, and, most importantly, presidential elections that would define the course of the economy for the next couple of years.
Last week, on November 3, the country voted for its next president, and even though the official count is not over yet at press time, the markets have already been reacting to the news.
When the current president prematurely claimed victory on the night of Election Day, Dow Jones Futures have fallen sharply by 300 points.
Dow Jones Industrial Average (INDEXDJX: .DJI) futures, along with S&P 500 futures, pushed higher, gaining 0.5% and 1.5%, respectively. The Nasdaq Composite Index (INDEXNASDAQ: .IXIC), which had been under pressure last week, surged, rising over 3.5%.
During the overnight session, futures contracts for the Dow and S&P 500 came under some pressure after Trump tried to claim victory.
On Saturday, November 7, CNN was the first media outlet to announce that former vice president Joe Biden was projected to win Pennsylvania’s 20 electoral votes and would become the next president.
Within an hour, NBC, CBS, MSNBC, and ABC projected the same on-air. The Associated Press and Fox News also announced Biden’s victory.
Despite that, Donald Trump refused to accept the results. In one of many of his following tweets, he said, “the election is far from over,” and warned that he is ready to proceed with legal actions to dispute the numbers.
Let’s look at how markets reacted to the previous US presidential election.
2016
The United States had the 58th quadrennial Presidential Election in 2016. Donald J. Trump won the Electoral College with 304 votes compared to 227 votes for Hillary Clinton. Donald Trump’s victory came after key wins in the battleground states of Florida, Ohio, North Carolina, and Pennsylvania.
After Donald Trump officially won the election, the global financial markets plunged but recovered later. Most global stock markets dropped, US stocks opened with a rough patch. Many investors believed Trump's unpredictable nature and anti-trade stance could result in global turmoil.
Dow futures fell by about 300 points Wednesday morning on November 9, 2016, CNN reported at the time. On the night before, they were down more than 900 points. The S&P 500 and the Dow Jones Industrial Average were up about half a percent around noon as investors more calmly absorbed the election results following a night of panic.