david klaskin, chief investment officer of chicago-based oak ridge investments, was attending a party with high-level finance professionals on tuesday night as the polls came in and stock futures tumbled. <u+201c>all in shock,<u+201d> he said of the attendees, many of whom he described as people who typically vote republican but weren't supporting republican presidential candidate donald trump. across financial markets from new york to hong kong, traders were left flat-footed as mr. trump surged toward claiming the 270 electoral college votes needed for victory in the u.s. presidential election. now they<u+2019>re preparing for far more upheaval in global financial markets, even as some look for bargains. in recent days, hedge funds have been adding to their stock and bond positions, in anticipation of a victory by hillary clinton. investors generally were rooting for a win by mrs. clinton because she<u+2019>s seen as more favorable to global trade and traders saw mr. trump as a more unpredictable candidate. on tuesday, morgan stanley said its hedge-fund clients added positions over the past week in the greatest size since feb. 12 of this year. <u+201c>after hedging a lot over the past few weeks, we saw a sharp reversal yesterday as (long-short hedge) funds covered shorts in one of the largest magnitudes we have seen all year,<u+201d> the report said, adding that funds were buying technology and financial shares on monday. morgan stanley said hedge funds exited short, or bearish, exchange-traded positions on tuesday, though kept overall exchange-traded fund short position near a 12-month high, something that could mitigate any losses. <u+201c>similarly, downside protection via index puts fell from 2015-2016 highs on friday, but remains elevated,<u+201d> the firm said. one thing investors should bet on: a more volatile market, traders say. global financial markets have been trading in unusually narrow ranges over the past year, but a victory by mr. trump could shake things up, as investors try to anticipate which policies he will focus on and which will gain approval in congress. <u+201c>under mr. trump, the range of outcomes for markets is substantially broader than what it would have been under mrs. clinton,<u+201d> says boaz weinstein, who runs saba capital management lp, a hedge fund that often buys investments that rise in value amid market upheaval. <u+201c>volatility should ratchet higher in the options market.<u+201d> other traders said they were gearing up to hunt for bargains on wednesday, amid indications in futures markets that stocks will tumble. amit wadhwaney, co-founding partner at moerus capital management llc said <u+201c>these dislocations provide opportunities to buy when things become extremely cheap.<u+201d> just after midnight in new york, mr. wadhwaney began to act. <u+201c>we are currently bidding for some stuff in asia that people are casting off,<u+201d> he said. <u+201c>and should this continue, i would expect to be active in developed europe tomorrow morning,<u+201d> especially in emerging markets. bradley golding, a managing director at new york hedge fund christofferson, robb & co. argued that a <u+201c>republican sweep will be good for banks and bank capital instruments as there may be a pause to the onslaught of regulation. unfortunately, this may well be offset by the collapse of asset prices and the economy.<u+201d> axel merk, chief investment officer of merk investments, hedged against a decline in stocks in the days leading into the election. one of his fund<u+2019>s trading strategies is more than 20% invested in gold, a popular safe haven. <u+201c>i<u+2019>m just drinking a glass of wine and feeling glad i<u+2019>ve got some gold in the portfolio,<u+201d> said mr. merk. gold prices were recently up 3.2% at $1,315.70 a troy ounce in electronic trading. while gold bounced, the cboe volatility index, the market<u+2019>s <u+201c>fear gauge,<u+201d> will likely open above 25 on wednesday if mr. trump is headed to the white house, said stephen aniston of vixcontango, a website providing research on volatility. <u+201c>a lot of people were banking on a big drop in vix after the 2016 presidential election,<u+201d> aniston said. at that point, the <u+201c>uncertainty<u+201d> would have been removed from the markets. instead, those shorting volatility will be in for a rude awakening. a lot of hedge funds have shorted volatility, aniston said, noting the uptick in put contracts on vix last week. there was five times the usual options volume surrounding vix put contracts last friday, according to trade alert, and twice the usual put volume on monday. <u+2014>corrie driebusch, ira iosebashvili and gunjan banerji contributed to this article. write to gregory zuckerman at gregory.zuckerman@wsj.com
as markets plunge, traders left <u+2018>in shock<u+2019> by trump success - wsj
gregory zuckerman