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The Presidential Election was front and center this week as the market began to rally Tuesday in anticipation of election results. Basically, the markets like certainty. Things really took off on Wednesday when it was clear that America had chosen its 47th President, Donald J. Trump. Wednesday’s performance was the strongest in more than two years.
Major Index Performances (as of Thursday Close):
- S&P 500: The benchmark index rose about (4.27%)
- Dow Jones Industrial Average: The Dow increased (3.98%)
- Nasdaq Composite: The index climbed (5.79%)
Economic data reported this week:
The Federal Reserve, on Thursday, trimmed interest rates by a quarter point, bringing the target rate to 4.5% to 4.75%. Fed Chair Jerome Powell said he was “feeling good” about the economy. He also said he would not step down from his post if President-elect Donald Trump asked him to do so. Powell cannot be fired by the President. At least not directly. The hope is these gentlemen come to terms and work together for the betterment of our country.
Though Chairman Powell was feeling good about the economy, the did state the rising U.S. deficit and overall fiscal policy remain headwinds to the economy. “The federal government’s fiscal path, fiscal policy, is on an unsustainable path,” Powell said. “The level of our debt relative to the economy is unsustainable. It’s easy to see why Powell made such a statement. The U.S. is running a $2 Trillion deficit every year and our federal debt is just about to tip $36 Trillion. We have talked about America’s spending problem for years and it is finally reaching a point that cannot be ignored. It is ultimately a threat to the economy.
Phil Clark, president of OmniStar, recently published an episode of “Were Talking Money” that focused on this issue. Click here to watch the episode. Interestingly, more focus was not placed on this issue during the presidential race.
What does a Trump Victory mean for the economy:
We believe the Trump administration will prioritize making permanent the Tax Cuts and Jobs Act, (TCJA). This was passed under his first presidency and is set to expire at the end of next year. We expect President Trump to follow through with the raising of tariffs on imports from China and a few other countries in an effort to finance further tax cuts and move towards a pro-business America. Of course, no one knows for those who are not familiar with how tariffs work, we don’t anticipate President Trump implementing a universal tariff increase. Rather, we reckon he will do this in a staggered fashion. The goal is to avoid imposing them on goods where the cost to US firms and consumers would be prohibitive. Overall, tariffs are not all bad and should not be viewed in this way. Suffice it to say, that most people reporting on tariffs don’t have the competency to explain how they work, let alone provide empirical evidence that such devices are universally bad. Perhaps the best news of all is the millions of election signs will finally disappear. Have a wonderful weekend,
Your Portfolio Management Team
