INVESTMENT markets react to shocks but then settle with reality.

President elect Trump’s historic and somewhat unexpected win in the USA elections has set a positive tone to US financial markets.

Unexpected because while commentators predicted a close result, opinion polls during the last week of campaigning said Kamala Harris was some three points ahead of Trump and that the USA could have its first female of colour elected as president.

The shocking reality is that Kamala Harris received more than ten million less votes than Democrat President Joe Biden recorded at the previous election.

As we now know, the result was a Republican whitewash.

Interesting then that news delivered the next morning was that some 43 monkeys had escaped from a research facility in South Carolina.

I’m sure that pundits must be asking if they recorded formal votes when trying to explain why actual voting was so different from that expected by experts.

It was then reported that the world’s most successful investor, Warren Buffett, was selling securities into the rapidly increasing market.

This is in line with the age-old market theory of buying the rumour but selling the reality.

Obviously, Buffett believes that while the market is high now, it probably can’t get much higher, so grab value in order to achieve profits.

Another worry for investors is the connection between the Central Bank and its independence from political or institutional interference.

The USA Federal Reserve chairman Jerome Powell reduced the interest rate immediately after the election result.

The suggestion was that Trump was not happy, but an immediate reduction in interest rates may just alleviate some of the political pressure coming his way.

The economic lesson that needs to get through the fog of political campaigning is that it’s all about the economy and how voters believe their personal financial position is in relation to where they would like it to be.

I would be amazed if Australian political parties are not now fully aware of this reality and are set to change their messages before the next election.

By John BLACKBOURN