Since the conclusion of the U.S. presidential election on November 8th, we’ve witnessed U.S. equity markets rally, bond prices fall, and the dollar strengthen. The U.S. equity markets hit several new all-time highs and the yield on 10 year Treasury notes rose from 1.80% the day before elections to close the year at a 2 year high of around 2.45%.
These market movements are due to expectations of what the incoming administration hopes to accomplish. The expectations are the new administration is going to increase fiscal stimulus through higher defense and infrastructure spending, alongside personal and corporate tax cuts. Increased fiscal stimulus, in theory, promotes faster growth for the U.S. economy and higher inflation over time.
One item to note is that markets tend to overreact then correct t over time. It would not surprise us if stocks just “marked time” into the first quarter as the real world catches up to expectations.
Now, let’s put things in perspective. The market behavior over the past two months was in anticipation of what the President-elect hopes to accomplish yet he doesn’t take office until Inauguration Day on January 20th. Even then, it will take time before proposed policies are put in place and for their impacts to be felt in the economy. U.S. economic growth will not increase overnight.
The focus for the markets over the next few weeks will be on what the President plans to accomplish in his first few months in office. Investors will look for clarity from the new administration on fiscal stimulus for the U.S. economy. Politics aside, economic growth started to pick up in the second half of 2016 and should continue that momentum this year.
If you are wondering about how your investments are positioned relative to the proposed changes or if your investments still will achieve your goals, please give us a call and arrange for a visit. With over 130 year helping families and businesses achieve their financial goals.Back to Articles