Monthly Economic Update November 2016
November began by completing the longest streak of consecutive down days (9) for the S&P 500 since 1980. The month ended with the longest string of consecutive up days (15) for the Russell 2000 in 20 years. The driver of the former was Donald Trump’s gain in pre-election polls. Strangely enough, his election as the nation’s 45th president drove the latter! Following the election, investors were swift to assess the potential ramifications of the Trump platform, namely lower taxes, reduced regulation, and fiscal support through infrastructure spending. The dollar, interest rates, and inflation expectations all catapulted higher. Healthcare, financial, energy, and industrial stocks rose dramatically, and domestic-centric small capitalization shares performed exceptionally well. On the flip-side, capital flowed out of emerging markets and bonds suffered uncharacteristic losses.
The month drew a strong line of demarcation between winners and losers. Going forward, however, such distinctions are likely to be far more nuanced. After all, with the inauguration itself still weeks away, it is impossible to assess how actual governance will deviate from campaign rhetoric. Likewise, exuberant investors seem to be downplaying material challenges. For example, dollar strength can act as a headwind to economic growth. Higher interest rates challenge corporate profits, can depress stock market valuations, and weigh on debt reliant economic sectors such as housing and autos. Moreover, fiscal spending takes time, acts with a lag, and fiscally minded Congressional leaders are unlikely (perhaps unable) to provide President Trump with a blank check. Lastly, the potential for protectionist driven trade wars is not insignificant. Such an outcome could be globally recessionary. In short, for excited stock holders and agitated bond investors, the future is unlikely to be quite so rosy or dismal, respectively.
This commentary was written by Robert W. Lamberti, CFA, VP and Co-CIO of Summit Equities, Inc. and Summit Financial Resources, Inc. Source of performance: MorningstarÂ®. Indices are unmanaged and cannot be invested into directly. The investment and market data in this newsletter is not an offer to sell or purchase any security or commodity. Past performance does not guarantee future results. The Barclays Capital U.S. Aggregate Bond Index is a market capitalization-weighted index comprising Treasury securities, Government agency, mortgage backed, corporate, and some foreign bonds traded in the U.S. The Barclays Capital Municipal Bond Index covers the U.S. dollar-denominated long-term tax exempt bond market. The Barclays Capital Global Aggregate ex. U.S. Bond Index measures the performance of global investment grade fixed-rate debt markets excluding USD-dominated securities. The Bloomberg Commodity Index measures the performance of the commodity sector representing an unleveraged, long-only investment in commodity futures. The Dow Jones U.S. Real Estate Index measures the performance of the real estate sector of the U.S. equity market, including real estate holding and development companies and Real Estate Investment Trusts. The Wilshire 5000 Total Market Index measures the performance of all U.S. headquartered equities with readily available price data. It is market capitalization-weighted and is designed to track the overall performance of the U.S. stock markets. The S&P 500 Index is a market capitalization-weighted Index of 500 widely held stocks often used as a proxy for the stock market. The Russell 2000 Index measures the performance of the small cap segment of the U.S. equity universe. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure the performance of developed markets, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure global emerging markets performance. Information throughout this Newsletter or any other statement(s) regarding markets or other financial information, are obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the reader. To unsubscribe from this investment newsletter please reply to this email with â€œunsubscribeâ€ in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision. Securities and Investment Advisory Services offered through Summit Equities, Inc. Member FINRA/SIPC, and Financial Planning Services offered through Summit Equities, Inc.â€™s affiliate Summit Financial Resources, Inc. 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600, Fax: 973-285-3666.