10 November 2016: The world turned upside down

trump-turnedIt is the world turned upside down: the election of Donald Trump as the 45th President of the United States did not make stock markets go down, in the end. All major US indices added at least 1.1% at the end of the first session after the surprise outcome of the US Presidential elections. It is not to say that there was no fear in the markets: shortly after it became clear that Trump had a much better chance of winning the election, VIX futures shot up 52%. However, during the night, these figures eased and at the beginning of yesterday’s trading session, most of the fear had faded. And during the session red figures turned green, even dark green.
What is going on? Are investors in denial? Was Trump’s victory speech balm for their soul? Or did investors make a quick calculation and realised that with the Donald in the White House and Republican majorities in the House and the Senate, the political reality in Washington of the next years will not be that bad to companies and investors? Or is this just the preview of what to expect with Donald Trump at the wheel, in which even an expectance of the unexpected gives you outcomes that are unexpected.

white-chapel-logo-smallAfter the election of Donald Trump, we expected volatility to go up and remain at a high level, maybe even for a long time. This turned out to be completely wide of the mark: at the end of yesterday’s session, the VIX lost more than 23%. Our UVXY ETFs closed 5% lower. Our return for the year slipped to levels of just before election day and now stands at 268%. Return for the quarter is slightly above 20%.
White Chapel did not give a signal at the end of yesterday’s session and expects volatility to go up, after the madness that surrounds the elections has disappeared.

Accumulated capital at close of previous trading day

Return since start

Return this year

Return this quarter

$36,823

+268.23%

+268.23%

+20.2%

Our initial capital was $10,000 at 1 January 2016. Our average Annual Return is 364%.

ta_v05-small-invTo many, the election of Donald Trump was unexpected. The reaction of the stock markets to Trump’s election was even more unexpected. And what will happen today or tomorrow or the day after that, will probably also be unexpected.
The current mood reminds Tim of a television series that was broadcast in the Netherlands during his youth and which he enjoyed very much: Tales of the Unexpected, based on the stories of Roald Dahl. It consists of episodes which are no longer than 25 minutes and which feature a twist ending. (Many episodes can be found on YouTube these days.)
Maybe this series should be compulsory teaching material to market watchers, stock pundits, etc., now that Donald Trump will occupy the White House shortly.