Prior to the recent US Election, almost the entire national establishment – save for a few outliers – predicted a decisive Hillary Clinton win. As news of the actual outcome began to circulate, shock set in for many. Nowhere was that more evident than on Wall Street, where high hopes for a Clinton presidency were palpable. Investors, enlivened by highly inaccurate polling data, bet overwhelmingly on a Clinton triumph, placing large amounts of capital on the line. Though some investors, such as Trump advisor Carl Icahn, made a fortune from the uncertainty that followed the immediate election aftermath, those investors who had heavily invested in Clinton took significant losses. However, some of the greatest losses came as Trump’s win spurred a stock market rally, rejecting pre-election predictions that a Trump victory would send markets into a nose-dive and cause a crash.
It was this rally which brought major losses to one of the country’s most controversial billionaires. On Friday, the Wall Street Journal reported that financier George Soros lost nearly $1 billion following the market surge that followed November’s collection. Citing sources close to the billionaire, Soros has been “cautious about the market going into November and became more bearish immediately after Mr. Trump’s election.” Yet, Soros – despite having been hailed in the past as a financial “prophet” – failed to anticipate the crucial market shift that took place soon after November 8th as expectations that a Trump presidency would boost corporate earnings and the economy, in general, pushed markets higher.
According to the report, Soros stacked up nearly $1 billion in losses. His bearish outlook, however, prevented further damage to his broader portfolio at Soros Fund Management LLC, the hedge fund he manages. Soros Fund Management performed better than Soros did personally as long-held investments in the finance and industrial sector led to an overall gain of 5% despite the negative impact on the election’s outcome on Soros’ wealth. Though $1 billion may seem a huge and unimaginable loss of money that would ruin and devastate most, Soros’ $24.9 billion net worth likely means that his recent error is more a source of embarrassment or frustration than anything else.
However, not all within Soros’ circle suffered from the election outcome. Soros’ former deputy Stanley Druckenmiller, who once helped Soros “break the bank” of England, switched from bearish to bullish after the election and “racked up sizable gains.” Druckenmiller, who left Soros’ firm in 2000, had accurately predicted that a Trump victory would lead to an initial stock decline, which then transformed into a rally. Conversely, Druckenmiller had also predicted that a Clinton victory would have produced a market rally initially but would then have translated into a stock decline long-term. Thanks to the election’s “surprise” outcome, Druckenmiller’s firm, Duquesne Family Office LLC, posted double the gains of Soros’ firm for 2016. Though the Trump stock market rally is by no means guaranteed to last, it seems likely that someone as conniving as Soros won’t misjudge Trump’s effect on markets a second time. Unless that is, he’s lost his touch.
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