Stocks Post Surprising Gains as Optimism Grows Following Trump Victory
Sources: Equity Market and Fixed Income returns are from JP Morgan as of 11/11/16. REIT, Rates and Economic Calendar Data from Bloomberg as of 11/14/16.
U.S. Stocks staged a surprising rally last week on the back of now President Elect Donald Trump’s unexpected victory in the U.S. Presidential Election. Despite the futures market falling dramatically overnight, stocks recovered and the S&P 500 Index finished week with a 3.9% gain while the Dow Jones Industrial Average posted an impressive 5.5% advance. Internationally, stocks were mixed as a stronger dollar and questions about trade policies led to a flat finish in developed markets, which gained 0.1%, and a selloff in emerging markets, which declined by 3.5%. Yields on U.S. Treasuries rose across maturities with the 10 year hitting 2.15% as investors speculated that fiscal stimulus will promote economic growth and may force a more hawkish monetary environment.
Economic data was relatively quiet last week with the two most impactful releases being Jobless Claims and Consumer Sentiment. Jobless Claims held steady at 254,000 – very much in line with past month’s claims and close to record lows. Consumer sentiment, which was measured before the election results, was better than expected and showed the strongest reading since June. This is welcome news since nearly two thirds of the U.S. economy, as measured by Gross Domestic Product (GDP) is driven by consumer spending.
One important lesson that can be learned from last week is that trying to time the market is often an exercise in futility. If an investor had been given advance notice that on Tuesday night Donald Trump would win the election, that investor would likely have sold stocks assuming a sell-off would ensue given the widespread belief prior to the election that Hillary Clinton would likely be the victor. In fact, some of the most recognized investors predicted an immediate sell-off in stocks following a Donald Trump victory as can be read on CNBC, The Financial Times, and The New York Times. So, even with a crystal ball telling you what economic, political, or other events are going to occur in the future, it is still not certain how the markets will respond to these events. For investors with a long term objective of growing their portfolio, we believe that the answer is to try and not jump in or out of the market based on short term news cycles but rather to try and remain disciplined and focused on their longer term financial objectives. As we have discussed in the past, one of the best ways to maintain this discipline is to have a financial plan completed so that you can understand how much money you are likely to need in the future in order to take care of yourself and your family. To start the financial planning process with Hennion & Walsh, or to have a portfolio review completed on your existing investments, please do not hesitate to speak with a Hennion & Walsh financial advisor or a member of the Hennion & Walsh Asset Management Team.
Important Information and Disclaimers
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
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MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
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LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITSs that primarily own and operate income-producing real estate.