Last week, Mike Moreland pointed out the stock market had experienced the second longest string in history without a one percent market decline. The streak ended Tuesday when the Dow Jones Industrial Average fell 237 points, declining 1.1%.
The outlook for growth in the economy and inflation increased after the presidential election in November. This new optimism for future growth spurred stock market returns. The Dow Jones Industrial Average gained over 15% from the elections through last Tuesday. This market enthusiasm was nicknamed “The Trump Trade” because markets reacted on expectations of the future without any immediate change in the fundamentals of the economy. What has changed now?
Again, nothing has fundamentally changed, but the reality of the time it takes to get new legislation and growth in the economy is settling in. Republicans were unable to gather enough votes to pass the repeal of the Affordable Care Act. This delay could affect the policy agenda for the year, pushing back other items like tax reform, which in turn pushes out the timetable for increased growth in the economy.
In periods of time when market participants are uncertain of the future, volatility tends to rise. We are likely to see bigger market swings in the months ahead as uncertainty grows over the timing of broad policy changes. We believe the best way to get through times of uncertainty is to keep your eye on the long-term. Develop long-term goals and create a diversified portfolio to help achieve your goals despite short-term market volatility.
Contact your Security National Bank Wealth Management advisor to review your investments and investment plan.
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