MARKETS RECALIBRATE: 2016 ELECTION IMPACT
62 TAMPA BAY MAGAZINE
WEALTH MANAGEMENT
| JANUARY/FEBRUARY 2017
Retirement Wealth Advisors
Your Financial Architects
www.THEHOLLANDGRP.COM
727.724.3334
2637 McCormick Drive #101
Clearwater, FL 33759
* This material has been prepared for informational and
educational purposes only.
It is not intended to provide, and should not be relied upon for,
accounting, legal or tax advice. Please consult with a professional
specializing in these areas regarding the applicability of this
information to your situation.
Investment Advisory Services offered through Mutual Trust Asset
Management
Much like the Brexit vote, the
disenfranchised populist vote
surprised political pundits and
sent the presidential election in the opposite
direction of what was expected. And much
like the Brexit fallout, starting the very night
of election results, markets reacted with
rampant volatility. Will the coming weeks
bring a more level reaction, similar to the
Brexit response? Time will tell. However,
our prevailing advice for investors is to make
portfolio modifications only when personal
circumstances change — not presidents.
Overview
It’s a common mantra on Wall Street: The
markets hate uncertainty. However, markets
have been known to adapt, and it appears, for
now -they’ve adapted to an uncertain future
in the United States. In the first day following
America’s 2016 election results, here’s what
happened:
• Dow futures initially plummeted by more
than 800 points but then closed near a
record high
• S&P 500 fell 5% before recovering and
closing with a 1% gain
• Nasdaq also ended 1% higher
• Japan’s Nikkei stock exchange dropped
more than 5%
• Stoxx Europe 600 fell initially but was up
1.5% by the end of the day
• 10-year Treasury yields rose 11%
• Value of the Mexican peso took a nosedive
against the USD
Market Considerations
The initial panic of a new administration
with unclear, and possibly unconventional,
policies waned within the first couple of
days. Some experts believe the markets will
take a “wait and see” stance through the end
of the year.
However, based on the President-elect’s
campaign promises, various market sectors
may continue to react. For example, Trump
(and Clinton, for that matter) has advocated
increased spending in infrastructure, which
bodes well for the construction, industrials
and materials sectors.
While financial, biotech and energy sectors
initially took a hit, they had rallied by midday
following the election. Health care stocks
could do well under a Trump presidency,
as he has vowed to repeal and replace the
current health care law with inter-state
competition. Clean energy dropped sharply,
while traditional energy sources are poised
to surge.
President-elect Trump’s position on reigning
back corporate regulation, including the new
DOL ruling, could provide a healthy boost
to the GDP moving forward. In addition,
corporate tax reform, which has long been
a bipartisan issue — just not one the two
parties could agree on — should make more
capital available for expansion, new jobs and
increased wages.
It is likely that for all intents and purposes,
the proposed Trans-Pacific Partnership
(TPP) between 12 countries is off the
table. If Trump follows through on his
promises to abandon or renegotiate the
North American Free Trade Agreement
(NAFTA) with Mexico and Canada, there
may be a considerable period of volatility as
trade supply and demand adjusts and U.S.
companies consider moving operations —
and jobs — back to the U.S.
Fiscal Considerations
In addition to corporate tax reform,
Trump has advocated lower tax rates for
all Americans. While that may increase
consumerism, it’s also likely to increase the
national deficit.
Many believe that one of the reasons the
financial markets rebounded strong was due
to Trump’s relatively calm and conservative
acceptance speech. The more he focuses on
policies, surrounds himself with experienced
advisors and loses the rhetoric, the less
uncertainty will get played out in the markets
and the economy.
Wharton Finance Professor
Jeremy Siegel says …
“Wall Street also has learned lessons from
Brexit — in which the markets recovered
after the initial shock of the vote to exit.
It taught investors not to overreact to the
surprise election news.”
Final Thoughts
The Chicago Cubs won the World Series
for the first time in 108 years. A week later,
a billionaire businessman won the White
House! So, what have we learned here?
Never underestimate what’s possible. But
rather than speculate on what might happen
with the future of the country, it’s better
to focus on your own goals. The key to
personal finance is to make decisions based
on what is best for both your current situation
and your future. At the same time – leave
the gambling and speculating –to the day
traders!
/www.THEHOLLANDGRP.COM