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You’re Not Crazy: The Stock Market Is Going Schizoid

Under the placid surface, markets are ripping in opposite directions.
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The first big surprise was Trump. The second the next day, when instead of tanking, U.S. stocks gained steadily, a trend that persisted during trading Thursday. As the Dow passed an intraday trading record, it looked increasingly like the election-night freakout – which saw Dow futures plummet 800 points and volatility contracts break a single-day volume record – was just a brief spasm.

Trump.HeadBurst

Wall Street learned to love the Donald. Particularly the things he said about tax breaks and infrastructure spending.

But Bank of America Merrill Lynch’s most recent investor survey shows that despite a balmy appearance, market participants are storming in opposite directions. The top two post-election trades, the bank said, were “buy S&P 500” and “buy gold/sell risky assets.” Investors were almost perfectly split between them: 30 percent of the bank’s client’s chose to jump in, 27 percent to run for cover.

Bank of America Merrill Lynch

Bank of America Merrill Lynch

It’s no surprise that Carl Icahn and his ilk threw caution to the wind and bought the dip immediately after Trump’s victory became certain. But the cheery past few days on Wall Street seem at odds with months of sage warnings from the likes of Mohamed El-Erian and Simon Johnson, among many others, that the Trump train would run headlong into equities.

The fact that conventional wisdom was wrong, at least in the short term, is no great shock. But the mood on Wall Street hasn’t been unanimous. Bridgewater Associates’ Ray Dalio struck a cautious tone Thursday, warning his clients to stay on their toes. “There is much more that we don't know than we do know,” he said, according to Business Insider. “It would be a mistake to use the rhetoric of a campaign as much of a guide to what policies are likely.”

So no, you’re not bonkers for wondering what’s up with the markets.

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