The impact of Tuesday's Presidential election is still sending shockwaves around the globe. It's too early to tell what the next four years will look like so I want to send out this quick update on the recent events in the bond and stock markets. First and foremost is that the market was positioning itself for this move regardless of who was going to be elected. Yes the market was under the presumption that Hillary Clinton was going to be elected but it became clear immediately that traders were ready to move out of bond positions as soon as the election was over. Combine that with several foreign governments moving to the sideline and the bond market is having difficulty finding a floor. Currently the 10yr is trading at 2.09%, up 30bps since Friday. It ran though the support level of 2.00% and could keep deteriorating to 2.20%, which is right around the level it traded at to begin 2016.

For the past several months there was a belief that a Donald Trump presidency would hurt the stock market and help the bond market, so what just happened?

Again, all market movement was based upon position changes determined before the election. Where we move from here will really depend on how events unfold post-election day. Please remember that Donald Trump is from New York and is pro-Wall Street; which is becoming more and more evident to the market. Recall he campaigned on change so how friendly he was going to be to Wall Street was an unknown. The market suddenly remembered that the Republican party is moving into power (a pro-Wall Street party) and that has brought much needed calmness. His choice for Treasury Secretary will be the most important selection as far as the market is concerned. Shakeups at the FOMC should be very minimal as Janet Yellen will remain Chair until 2018 and will be a member of the committee until 2024.

The unknown factor at this point is what his Presidency will focus on. He has been very vague about policies and direction, not to mention this was a very divisive election. If the nation continues to be deeply divided then that could hurt stocks and bring bond yields back down. Hillary Clinton and President Obama so far have focused on a smooth transition of power which has helped the stock market reach new all-time highs. I certainly would expect more market volatility as Trump's administration continues to take shape. Controversy could bring stock prices down but so far the market has held unexpectedly strong, especially considering the fact that many prestigious economists assumed a Trump's presidency would bring a recession to the United States. A lot of the current protests in various cities around the US are assumed to be temporary but if the divisiveness does not die down it will certainly weigh on stocks and we could see some reversion in the bond market.

Be cautious, however, as the Fed is inclined to raise rates and the world may not look as favorably at US debt going forward. There are great risks in both directions and given the unprecedented nature of this election, I would expect the market to follow in an unprecedented way as well. My gut is that both parties will spend the rest of this year focusing on tackling the divisiveness and restoring calm after a very heated election; but next year will likely bring more controversy as Republicans look to make major policy changes. For rates that could mean higher levels through the remainder of the year with 2017 being a complete unknown.