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Dalio: Stock Market Correlation with Trump Reversed after Election


Nov. 20 2020, Updated 4:24 p.m. ET

Trump slump to Trump rally

November 8, 2016, marked a political shift in the history of the US (SPY) (IWM). Republican Donald Trump was elected the next US president. According to Ray Dalio, the stock market was largely negative on Donald Trump before and immediately after the 2016 US elections. However, the correlation reversed, and the markets experienced a Trump Rally as the focus turned to the president-elect’s policies.

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The correlation reversed

According to GAMCO Investors’ chair and CEO, Mario Gabelli, at 2:30 AM on November 9 when the news came out, markets were down as a result of a sell-off led by Europeans and non-Americans who weren’t comfortable with a Donald Trump victory.

As the news settled in, investor focus shifted to the impact that Trump’s policies could have on their investments. The markets thus saw financial (XLF) and infrastructure stocks providing support. Trump’s infrastructure plan should benefit companies belonging to the industrial sector (XLI) (DIA). Thus, companies engaged in infrastructure, building materials, and equipment rentals will likely gain as a result of the infrastructure building spree that is expected in the US.

The financial sector is expected to gain because of the steepening yield curve and because banks are expected to see less regulation during Trump’s presidency.


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