How might markets react if Trump contests the election?


Gold, the dollar and US treasuries could be favoured safe havens if today’s US presidential election ends up being contested, history shows.

Republican nominee Donald Trump has said he would keep the US “in suspense” over whether he would accept the election result and later followed this up by implying that he would only accept the result if he won.

The last time an election was contested was in 2000, when the decisive vote in Florida went to the Supreme Court, which ruled George W Bush was to become president in a 5-4 decision that saw him beat Al Gore.

Commodities (led by gold) rallied 7 per cent in the period between election day on 7 November and the decision by the Supreme Court on 12 December, analysis by AJ Bell shows.

The US 10-year treasury rose almost 4 per cent over the period.

In contrast, the S&P 500 dropped more than 4 per cent and MSCI Emerging Markets slumped more than 6 per cent over the period.

Russ Mould, investment director at AJ Bell says: “During that five-week period of uncertainty, stocks slumped in the USA and worldwide.”

However, any investors who were tempted into buying on the dips in the stock market got caught out.

“A rally in the America’s benchmark S&P 500 index proved short-lived and a trap for dip-buyers.

“This was because the tech, media and telecoms bubble had begun to burst and 2001 was a tough year for stocks, even if the worst of the rout took place in 2002.

“In the 12 months after that contested and controversial US election of 2000, US Treasuries, gold and the dollar generated positive returns while stocks took a battering.”

“Investors must be wary of the reflex temptation to buy on any dip and do their research to ensure the underlying fundamentals of the US equity market remain sound, even if the example offered by the UK’s Referendum vote in June is a potentially encouraging one.”