Stock Market Outlook - now what?

The election is over. The votes have been tallied. Now what? What can we expect for the economy and the stock market? Here are some of the key points to consider:

What will our new president mean for the stock market? 

In general most economists view a Trump presidency as pro-growth. His proposals for lower taxes, less regulation, and deficit spending to improve infrastructure are generally seen as good for the economy and the stock market. However, his opposition to free trade is generally opposed by business leaders. Much remains to be seen how much he can get done with rewriting trade deals, however many suspect he will have better luck with lowering taxes and regulation given a Republican led Congress and Senate. 

What impact will the election have on the Federal Reserve's meeting in December? 

Hard to say. Initially traders were pricing in a rate hike in December, but that probability has dropped significantly. Chicago Fed President Charles Evans said yesterday as voters were casting ballots the Fed would keep an eye on financial market volatility and whether fiscal policies would change after the election. Clearly if Mr. Trump's policies are seen as pro-growth and inflationary, the Fed will act to raise rates, which could slow the recovery. All in all, it once again seems the Fed is relying on stock market volatility as their benchmark on whether to raise rates. (Source: NBC News)

What about international markets, especially emerging markets? 

The global economy has been recovering, and many continue to see improvement despite this election. Some of the protectionist ideas of Mr. Trump may not bode well for foreign countries, but his policies still need clarification, it may be too early to tell the impact. Emerging markets have benefited from rising commodity prices, copper for example. 

What stock sectors stand to gain? 

Initially healthcare stocks were seen as the loser, but sentiment is mixed. With the possible repeal of the Affordable Health Care Act, which has squeezed profit margins for health insurance companies, the Wall Street Journal predicts the outlook for this sector may improve. Energy companies, traditional suppliers of oil, gas and coal are viewed as benefiting from the new administration as well as U.S. infrastructure companies. (Source: WSJ and Motley Fool) 

Benjamin Graham, the famed investor, once quipped "The day-to-day market isn't a fundamental analyst; it's a barometer of investor sentiment." My advice, as always, is be careful about disrupting long term portfolios due to short-term uncertainty. 

Michael Aloi is a Registered Representative with Summit Equities, Inc. Securities and investment advisory services are offered through Summit Equities, Inc. Member FINRA/SIPC. Financial planning services are offered through Summit Financial Resources, Inc. 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666.

Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. If you require specific tax advice, please consult a qualified tax professional.

Recommendations expressed may not be suitable for all individuals. You should not rely exclusively on the information in this presentation. Independent research of the risks involved should be conducted. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. 

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