Last week the US stock market had its best week since 2014, after an election result that almost nobody saw coming. The Dow Jones Industrials rose about 5% for the week. At the week’s beginning, The Dow went up in anticipation of a Clinton Presidency, then dropped 700 points in Dow futures in a short initial post-election shock, and then finally rebounded in actual trading the day following the election.
Trumps conciliatory tone in his acceptance speech seemed to set the stage for a U.S. stock market rebound. The US equity market is cautiously optimistic of a broad-based prosperity in a Trump administration brought about by massive fiscal stimulus, regulatory rollbacks, tax cuts, big increases in GDP growth, corporate profits and jobs. The bond market, however, is signaling concern that the likelihood of unfunded tax cuts to finance infrastructure spending, and a radically reshaped Federal Reserve will create an inflationary environment. Accordingly, in anticipation of inflation, market interest rates have moved up sharply in just a few days, causing bond prices to drop, offsetting equity gains.
Much uncertainty lays ahead—both here and abroad—and we expect continued bouts of volatility. If Trump were to act on some of his more controversial campaign promises, you could see wide market swings. The first few days following the election are, at best, a guess of what a President Trump will do. Nobody really knows, however, what events are going to transpire. Below are links to some of the better commentaries we have come across:
- Go Figure! Oaktree’s Howard Marks initially is somewhat encouraged that Trump is appearing about as “presidential” as we could have thought possible. However, the range of possible actions and outcomes in a Trump administration are far too broad to be predicted.
- A Trump White House: Potential Market Impacts of the U.S. Election. Loomis Sayles’ Tom Fahey provides his best guess on what will happen with key issues: GDP growth, tax policy, inflation, the Fed, equity markets, credit spreads, the US dollar, interest rates, and trade.
- Welcome to the new world of reflation. Blackrock’s Russ Koesterich‘s view is that investors are preparing for the potential of higher growth—and inflation in the post-election markets.
- Investing After the Election: Policy Outlook, Market Risk and Opportunities. Pimco’s Scott Mather and Libby Cantrill team up to tackle the big questions.
The election was a big surprise to most Americans, in large part, because we didn’t “get” the appeal of Trump. An article that appears in the Harvard Business Review “nails” it.
- What So Many People Don’t Get About the U.S. Working Class.
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Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security. J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.