Report: Trump victory will likely lead to major downfall of global financial markets

On Friday, the non-partisan Brookings Institution released a paper which describes the expected impact of the outcome of the 2016 U.S. presidential election on the global financial markets, reports the Huffington Post.

Authored by the University of Michigan's Justin Wolfers and Dartmouth College's Eric Zitzewitz, the piece notes, "...we estimate that market participants believe that a Trump victory would reduce the value of the S&P 500, the UK, and Asian stock markets by 10-15%, would reduce the oil price by $4, would lead to a 25% decline in the Mexican Peso, and would significantly increase expected future stock market volatility."

Authors studied the asset price movements during the events that negatively impacted Trump's chances and write, "On September 26, 2016, Hillary Clinton was regarded by post-debate polls to have defeated Donald Trump in the first Presidential debate, and her odds of election in the Betfair prediction market increased from 63 to 69 percent. Given that most financial markets are typically quiet during that time, movements in asset prices likely reflect market participants' collective view of the impact of the 2016 election. During the debate event window, U.S., UK and Asian stock markets rose, crude oil rose, the currencies of trading partners such as Mexico, South Korea, and Canada rose against the dollar, and expected future U.S. stock market volatility dropped sharply."

See more on the 2016 election:

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The best Donald Trump & Hillary Clinton jokes from the Al Smith Dinner

“The media is even more biased this year then ever before. You want the proof? Michelle Obama gives a speech and everyone loves it, it’s fantastic. .. My wife Melania gives the exact same speech. And people get on her case!"

REUTERS/Jonathan Ernst

"It's amazing I'm up here after Donald. I didn't think he'd be OK with a peaceful transition of power." 

REUTERS/Jonathan Ernst

"After listening to your speech, I will also enjoy listening to Mike Pence deny that you ever gave it." 

REUTERS/Jonathan Ernst

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They also noted similar movements in markets following the release of a damaging 2005 'Access Hollywood' tape in which Donald Trump made inappropriate comments about women.

Authors say, "All told, these movements suggest that financial markets expect a generally healthier domestic and international economy under a President Clinton than under a President Trump."

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Markets

DJIA 21,080.28 -2.67 -0.01%
NASDAQ 6,210.19 4.94 0.08%
S&P 500 2,415.82 0.75 0.03%
NIKKEI 225 19,682.57 -4.27 -0.02%
HANG SENG 25,701.63 62.36 0.24%
DAX 12,600.64 -1.54 -0.01%
USD (per EUR) 1.12 0.00 0.05%
USD (per CHF) 0.97 0.00 -0.08%
JPY (per USD) 111.36 0.11 0.10%
GBP (per USD) 1.28 0.00 0.22%

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