Trump Nears Victory, Clinton Silent

Shock descended on markets as Donald Trump defied polls showing not far behind to become the 45th President of the United States. USD/JPY is down nearly 400 pips and USD/MXN up 12% as the shocking turn unfolded. Markets will be sifting through the wreckage for weeks as everything from trade deals to the December Fed hike is firmly back on the table. The Clinton campaign manager called on supporters to go home as there are a few states too close to call such as Pennsylvania. Odds of a Dec Fed hike fell from +80% to less than 50%. A recount of the vote is likely at this point. Premium trades in the Eurostoxx, USDJPY, gold, silver and EURCAD all deepened into the green. AUDNZD was stopped out.

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The parallels with Brexit are unmistakable but even more stark. Trump was further behind in far more polls than the Leave side in the closing days of the campaign. His path to victory was miniscule but he outperformed by more than 5 points in many places. The nail in the coffin came in Wisconsin where he scored an upset.

In the day ahead, the aim will be to focus on the small picture first. S&P 500 and Nasdaq futures touched 5% limit-down circuit breakers. The drop in USD/JPY will give Japanese leaders fits but intervention isn't likely until 95.00, despite quick jawboning.

At the moment, fast money trades are still driving the moves and there is still a sense of disbelief. Once the magnitude of the uncertainty hits, real money risk aversion will overwhelm markets. There is no certainty on foreign policy, the Supreme Court, key government positions, trade and even Janet Yellen's future at the Fed.

More broadly, it rekindles the questions on trade and immigration dissatisfaction. This will not be a one-day event in markets, it will last four years at the very least. There are no short-term dips to buy in risk trades. These moves will extend and dip buyers will be cleared out.

Eventually, there will may be a case to buy the dollar on fiscal stimulus because of an all-Republican House, Senate and White House but that's at least a month away.