Market Insider with Patti Domm Trader Talk with Bob Pisani

Trading is back, another big beneficiary of a Trump win: many brokerage firms, stock exchanges and asset managers are up double-digits this week.

Stock volumes on Wednesday and Thursday were twice normal. TD Ameritrade's CEO, Tim Hockey, was on our air this afternoon, noting that the big volatility this week and particularly on election night "drove new investors and traders onto the platform." New accounts almost doubled the normal rate, he said.

After years of low volume and retail accounts fleeing, the trading community has suddenly gotten excited again.

Brokerage firms like E-Trade, Charles Schwab, and TD Ameritrade are flying this week, up double digits. There's three reasons for the rally:

1) A broad stock market rally helps them. "These are high beta stocks, so when the markets go up, you would expect them to go up even more," said Rich Repetto, who analyzes the brokerage and exchange community at Sandler O'Neill. "When markets go up, these firms go up even more."

2) When volume goes up, they benefit because they charge for trades. "People are trading more, so they are getting an earnings boost," Repetto explained. "Their fundamentals are improving."

3) Higher rates are also a benefit. They own banks that take the cash from trading accounts and invest it along the yield curve.

Exchanges like ICE and CME are also up double digits on hopes for higher trading.

Asset managers like Legg Mason and Waddell & Reed are also up for similar reasons, but there's an additional factor: hopes the much-hated Fiduciary Standard Rule will be repealed. That rule would require fiduciaries to put client interests ahead of their own, which everyone agrees is a good idea. But it also opens the door to the potential for large numbers of what may (or may not) turn out to be frivolous lawsuits that could bog the entire industry down for years.

Expect this to be a top priority for Trump's financial market team.

Now comes the hard part: getting the average American to buy more stocks. We all know that the number of households that own stocks has declined, which means stock ownership has become even more concentrated. The top 10 percent of households own the majority of stock.

The investment community would really love to change that.

After moving 100 points in the S&P 500 in a little more than three days, markets are taking a pause.

And with good reason. The sectors that are benefiting from the perception of less regulatory scrutiny — banks, health care, and to a lesser extent energy—are still up, but sectors that are being hit by concerns on higher interest rates (telecom, real estate, utilities) or trade concerns (technology) are trading down.

There is now a new trading mentality around the Trump victory.

When I came into the NYSE this morning at about 5:15 am ET, the few traders walking around were expecting a huge downdraft on the open with a big spike in volatility.

The only thing they weren't expecting was a flat opening.

That's exactly what happened.

It wasn't just flat, it was relatively calm. The NYSE had made some modest changes to the way stocks open following the August 24th 1,000 point drop in the Dow on the yuan devaluation (generally they made it easier to have a fully automated open), so that may have helped. But even then the number of stocks that opened above or below 5 percent was relatively modest.

And volatility—the CBOE Volatility Index (VIX), a measure of trader interest in buying protection against further market drops--declined to 16 and change. 16? Last night there were traders saying the VIX could open at 50.

What happened? Simply put:

1) The sectors that would benefit from a Trump infrastructure stimulus (metals/mining, steel, some Industrials),

2) Combined with the companies that would benefit from reduced regulations (pharmaceutical/biotech, energy, banks),

3) Combined with those that would benefit from higher interest rates (banks, insurance), or

4) Might benefit from increased defense spending (Lockheed, Raytheon)

Are being balanced against companies:

1) That might get hurt by trade issues (autos, some tech, some railroads), or

2) By the abolition of Obamacare, like hospital stocks.

Bottom line: Combine the potential for tax reform, fiscal stimulus, and lower regulations. Balance it against worries on trade. You have the market we are seeing today.

Finally, a shout-out to the little-understood (and sometime maligned) stock circuit breaker system. The eMini S&P 500 futures contract halted trading around midnight, when it fell 5 percent. Under the rules, it could have traded higher, but not lower, until the open. Which is what it did immediately—trade higher. That was the low. My point is that these circuit breakers were designed to pause the market during periods of high panic and uncertainty, and to give a few moments of reflection. That, it seems, is exactly what happened.

Now what?

The markets are grappling with the reality of a Donald Trump victory, which includes:

1) Lower stock indexes, but some clear winners. A drop of 5 percent or so is certainly expected, and there is still the risk of a longer fat tail, but not all stocks are dropping. Defense stocks like Raytheon and Lockheed Martin are likely early beneficiaries. Copper is up 2 percent, along with Caterpillar and Vulcan Materials, a sure sign that infrastructure plays will likely rally as well.

2) Less regulation. Early beneficiaries are likely to be industries that were threatened with heavier regulation under a potential Hillary Clinton presidency. That would principally include pharmaceuticals, but it may also include banks and even oil stocks, since its possible that lower support for renewable energy could benefit Big Oil.

3) Emerging market stock under performance. Developing economy assets are likely to remain under pressure for some time on currency issues, and concerns over trade.

4) Flight to "safety" to currencies like the Japanese yen and the Swiss franc. Both those currencies did strengthen, though both gave back much of their gains. This may force central banks to lower rates even more, or in the case of the Bank of Japan, deeper into negative rates. The European Central Bank may extend its quantitative easing (QE) program, now scheduled to expire in March 2017.

5) Lower chances of a Fed rate hike. With volatility up, the chances of a rate hike in December by the Federal Reserve diminish, though most traders feel the Fed could still make a case for a rate hike—though likely making clear the "glide path" would be even more shallow than it had previously indicated.

Everyone knows that the markets have been pricing in divided government. Market watchers see a Clinton win with the House staying Republican.

The S&P 500 dropped 3 percent in nine straight days of losses in the last two weeks as the presidential election polls narrowed, and on Monday regained more than half the losses. It comes after FBI Director James Comey said a review of new Clinton-related emails did not change the agency's July decision not to recommend charges related to her handling of classified information.

Is any rally on a Clinton victory a doomed rally? At the end of last week, Nomura implied that it was.

"[I]t's completely plausible that if Clinton wins, any sort of relief rally in equities is faded as a lot of technical damage on the charts has happened and because markets also might be coming around to the idea that her administration could be bogged down by the House and the overall environment can remain contentious and therefore volatile," Nomura said.

Roberto Friedlander at Seaport Global argued that this "Comey Rally" was "similar to the knee-jerk Brexit reversal where we saw a plunge, followed by a failed rally."

"Don't be surprised to see this Comey Rally fade late today," he added.

"Fade the Clinton rally" is having its moment.

Man, this is a strange market. We have:

1) Generally positive economic news. Continued job growth. U.S. car sales beat expectations for October. Personal spending was also stronger in September. Even China reported better-than-expected manufacturing numbers. Sure, sub-2 percent GDP is a drag, but there's mostly more good news than bad.

2) Better-than-expected earnings reports (with 85 percent of the S&P 500 reporting, earnings are up 3.9 percent from the same period a year ago, the first positive quarter since the second quarter of 2015).

Those two factors would typically lead to a higher stock market.

But it's not. Because we have the election, the Fed and oil.

1) The election: The presidential vote is the biggest "known unknown" the markets have had to deal with since Brexit. Fortunately, it will be over soon.

The current thinking is that a "status quo" result — Clinton win, House stays Republican — will result in a modest 3 percent or so rally. If Trump wins, House stays Republican and Senate swings to the Democrats, most believe stocks could move down perhaps 5 percent, but the conviction is not high on this. Remember — this week the market already began the process of factoring in a Trump win.

2) The Fed: Few have noticed that while the election has roiled the markets this week, the Fed has had a profound influence on stocks for the last several months. Interest rate sensitive groups have been sold. Banks have outperformed. Ten-year bond yields have moved close to 50 basis points since bottoming in June, two-year Treasurys have moved more than 20 basis points. The markets are already doing much of the work for the Fed.

Barring some exogenous shock, the Fed is almost certain to move in December.

A 161,000 increase in the U.S. nonfarm payroll report was more than enough for the Fed to raise in December.

Remember, the Fed appears to have set a very low threshold for a rate hike. In its most recent FOMC statement, where it said, "The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives." That one word — "some" — would seem to indicate it won't take much to hike.

While there is still more data in front of us — we will have the November jobs report before the December Fed meeting — it's hard to imagine the data falling apart so much the Fed will demur on this one.

What other factors might derail a hike? Perhaps a Trump victory.

3) Oil. The $50-$60 trading range everyone was expecting going into 2017 is now greatly in doubt. With oil down 10 percent in the last week and back in the $40-$50 range, this is having two negative effects: a) raising doubts that oil company earnings will finally turn the corner in Q4, and b) because oil is a proxy for global growth, it's again throwing a spotlight on poor prospects outside the U.S., something that several U.S. Industrial companies have already highlighted.

Fortunately, the elections and the Fed should be over in a month, and there will be a 2017 to focus on. Barring some unlikely outcomes, the main story next year will likely revolve again around central banks and how they will extricate themselves from the low interest rate environment.

As long as the economy continues to improve, and we don't have instability, the Fed could even hike twice next year. Throw in a little inflation, and you have a steeper yield curve. That would play into corporate funding costs. And who knows? The ECB may even finally start tapering its own bond purchasing program.

Hey, you can always dream.