Impact of the Trump Travel Ban On the Stock Market

The stock market futures began to tumble after the president announced that the travel ban included goods as well as people. The US stock market tumble was in response to the European stocks plummet after the president’s announcement. Although, the president corrected his statement saying that the ban would not affect “trade and cargo,” the stock market continues to plunge at this new development.

The S&P 500 dropped over 4% in premarket trading, this plunge happened right after the Dow Jones experienced its worst market day, yet on Wednesday. For the first time since 2008, the Dow entered into bear territory with its futures dropping over 1000 points, or 4.6%.  The S&P 500 (SPX) futures were down 4.3% and the Nasdaq (COMP) futures dropped 4.5%. This came with the tumbling of Airline stocks—Delta Airlines, United Airlines, and American Airlines were all down by 14% as a result of the Trump travel ban announcement. The IAG airline group was down almost 9% while Tui dropped 14%.

The US stock market isn’t the only stock market that has been hit as Japan’s Nikkei 225 index closed 4.4% lower, Hong Kong’s Hang Seng index (HSI) finished 3.7% lower, the Shanghai Composite Index (SHCOMP) was down 1.5%, and South Korea’s Kospi Index (KOSPI) closed 3.9% lower, all at the close of Wednesday’s market. Generally, the Asian stock market experienced a great tumble. 

London’s FTSE 100 index (UKX) also dropped 5.5% with every share trading lower.  CAC 40 lost 5.4%, Germany’s DAX (DAX) dropped 5.5%, while Italy’s benchmark stock index which had already dropped 18% this week, still plunged 5.1%. The global oil benchmark, Brent crude had its futures down 5.3%, trading at $33.90 a barrel.

The majority of Thursday’s market decline is attributed to Trump’s travel ban announcement, which initially sowed a seed of confusion amongst investors and traders. The confusion stemmed from the initial announcement which said “Europe” and not specific countries in Europe. Another leading cause of the confusion was that the ban affected both people and goods, saying that “prohibitions would not only apply to the tremendous amount of trade and cargo but various other things as we get approval.” This later clarified in a tweet saying that trade will in no way be affected.”

Though the markets have experienced a lot of “bad days” since the coronavirus outbreak, the travel ban may yet intensify the economic decline. Katrina Eli, a senior economist at Moody’s Analytics is of the opinion that “the fear and panic related to the virus and the associated altered economic behavior that could be a damaging tipping point, forcing the global economy onto a darker path” is the major reason for the economic decline and not the virus itself.

Take-Home Points

• President Trump announced a travel ban on selected European countries. The ban will take effect from 11:59 pm on Friday.
• The Trump travel ban has caused the airline travel sector to decline greatly with stocks of major airlines closing down by 14%. Generally, the coronavirus impact on the airline travel sector has caused a lot of airlines to cut back services to hotspot areas.
• Stock market futures tumbled on Wednesday following the travel ban announcement
• The S&P 500 and Dow Jones futures entered bear territory on Wednesday, but only the Dow Jones closed in bear territory.
• There have been over 115,000 coronavirus infection cases with 4,600 recorded deaths worldwide.