Virtually all risk assets were higher last week after the election results and another rate cut by the Fed.
However, regardless of who was going to emerge victorious on election day, the same issues would face either candidate post-election - stretched valuations, earnings revisions lower, and consumers feeling tired. Last week the Fed unanimously voted to lower rates by another 25 basis points, on top of the 50 basis point rate cut back in September. The Fed stated that another rate cut of 25 basis points is likely in December and so far, the market tends to agree. With regard to the election, whoever is in charge in D.C., the U.S. economy and the market tend to have an upward bias. While certain sectors might under-perform under one party and out-perform under another party, the market still tends to head higher over time.
That being said, President-elect Trump is inheriting a different economy and market situation than he did in 2016.
The economy was solid, but not robust and the market was moving higher, but at a slower pace in 2016. Today, we see stretched equity valuations, a once-in-a-lifetime equity market, higher interest rates and inflation, a struggling housing market, and an economy/market that might be peaking rather than positioned to rally substantially. The U.S. consumer more closely resembles 2000 and 2007. With higher interest rates, consumers appear to be scaling back on adding further debt to their personal balance sheets. Estimates for 4th quarter corporate earnings continue to slide, with the earnings for the top S&P 500 companies (Mag 7) have been revised lower by 13%. This week we'll get inflation numbers and there are multiple Fed speakers, which should make things interesting.
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The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.
Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
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