M-RCBG Faculty Working Paper No. 2017-01

Company Stock Reacts to the 2016 Election Shock: Trump, Taxes and Trade

Alexander F. Wagner, Richard J. Zeckhauser, and Alexandre Ziegler

February 2017


The election of Donald J. Trump as the 45th President of the United States of America on November 8, 2016 surprised most observers. The election’s unexpected outcome1 combined with the wide policy differences between the two candidates led to substantial reactions on financial markets. Large price moves were recorded across asset classes, including stocks, bonds, and exchange rates. While analyst commentary on the implications of this historic election for individual firms or industries abounds, to our knowledge, no academic study has investigated which industries and firms will benefit or suffer under the new administration. Assessing the winners and losers from the election is interesting, because there were sizable differences in the policies favored by the two candidates in at least four economically important areas: government spending (and the size of the deficit), taxation, trade policy, and regulation.

This paper uses the reactions of individual stock prices during the days and weeks following the election to identify the relative winners and losers from the Trump administration’s expected policies. In an era where politics is extremely polarized and forward-looking assessments of economic prospects are often tilted and exaggerated, it is instructive to investigate investors’ assessment of the prospects for different firms and industries.

Download the paper in PDF format