Donald Trump has been elected as the 45th president of the United States and in the congressional elections, the Republican Party has again secured control of both the House of Representatives and the Senate.

The combination of a Trump presidency and a Republican-controlled Congress suggests that the new administration may initiate major changes to US fiscal policy and international trade deals. These new realities are likely to increase uncertainty about economic growth and may provoke additional market instability in the coming months. However, it’s important to note that tax reform and appropriations require Congressional approval, and presidential candidates’ campaign proposals are almost always subject to major changes by Congress. Still, the proposals from President-elect Donald Trump establish a starting point for negotiations with legislators.

What’s next for taxes, spending, the economy, and markets?

Markets hate uncertainty, and at moments of uncertainty, they typically react with volatility. As Trump’s victory was confirmed, S&P futures fell sharply, while European and Asian stocks dropped substantially. However, by midday in Europe, equity market anxiety had eased somewhat and as I write this, the US equity markets as measured by the Dow Jones Industrial Average is up +314 points. Yes, that says up +314 points.

As time passes, the market will digest this new reality and whatever news there is available and assess whether this will really have a fundamental impact on the things that matter for the direction of markets. Such as interest rates and the direction of expected Fed moves, the economic cycle, corporate earnings and things like inflation. It’s not clear that this change today has in any way influenced those fundamental drivers. And as a consequence, what we are experiencing today is likely to pass, get digested, and we will find a new path for the markets.

Politics can seem very important but in reality, when we look back on election cycles, there is generally a disconnect between the rhetoric of the politicians and the facts behind the economy and markets. There’s also quite a difference between the promises that are made leading up to an election and the outcomes that are ultimately delivered. When we think about the actual political influence on markets, it tends to be far more sentimental than truly fundamental. Of course, in the midst of wide short term market reactions, it’s hard to hold on to those ideas. Ultimately the market will see through this patch of uncertainty and recognize where the true drivers for future outcomes are.

At Premier Wealth Advisors, we are actively participating in discussions, and meetings with economists, portfolio managers and peers to get a good handle on the impact to our clients and our investment strategies moving forward.

Stay calm and stay invested. We will continue to keep you posted in what is likely to be a highly turbulent market over the next period of time.