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So Which Is It -- Is the Donald Good or Bad for Stocks?

Our evidence shows the U.S. election had nothing to do with the Dow's new high

by Bob Stokes
Updated: November 14, 2016


[Editor's Note: The text version of the story is below.]

Is Donald Trump good or bad for stocks? The financial press says both!

On Nov. 10, two days after the U.S. presidential election, the Dow hit an all-time high of 18,873.60.

Most market commentators default to news to explain why the market behaves as it does, and in this case, they attributed the price surge to Donald Trump's election win:

  • U.S. stocks surge following Trump victory (Chicago Tribune, Nov. 9)
  • Trump rally Day 2: Dow hits record high (USA Today, Nov. 10)
  • US stock market hits record high after Donald Trump’s victory (The Independent, Nov. 10)

But consumers of the financial press might be a little confused. In the days and hours before the election, they were told, to the contrary, that Trump was bad for the stock market:

  • A Trump win would sink stocks. (CNN Money, Oct. 24)
  • As Trump keeps rising in polls, stocks keep falling (CBS News, Nov. 4)
  • Dow futures tumble as Trump leads vote count (Boston Herald, Nov. 8)

This type of blatant conflict in cause-and-effect reasoning happens regularly in the financial press. Yet, most investors continue to assume that news drives the stock market's trend.

Our way of market forecasting does not depend on who wins an election or any other news. Rather, we watch time-tested indicators with a focus on the market's Elliott wave structure.

On Sept. 2, 2016, we saw two ways to interpret the market's wave structure. The September Elliott Wave Financial Forecast said:

Both wave labels indicate that the structure of the Dow’s rally is not finished, so we expect another upward push. [emphasis added]

So, we were not surprised by the new all-time high in the Dow. Indeed, we expected it, two months ago!

This weekly chart from our Nov. 11 Short Term Update shows the Dow's rally since 2011 [entire wave labeling available to subscribers]:

The last bar on the chart shows that during the week of Nov. 7-11, the index climbed 5%.

The U.S. election, the before-and-after stock market comments and the market's actual behavior all serve as timely reminders of our consistent message (Frost & Prechter's Elliott Wave Principle):

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life.

As we see it, this is one of the most crucial times in U.S. market history to keep a close watch on what the market's price pattern is revealing.

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