After a three-week run following the election where major U.S. indexes posted significant gains, we saw more mixed results last week. For the month of November, U.S. equities were positive – especially ‘small’ and ‘value’ oriented equities. International equities faired less well. Emerging markets now seem likely to have an overhang of uncertainty for some time, given trade threats made by President Elect Trump. We see it as unlikely these threats will become policy despite campaign trail promises. [i]
Perhaps the most interesting occurrence following the election was the rapid increase in interest rates with the 10 year U.S. Treasury note increasing about one-half percent. So when you hear the FED raises rates in December, remember the market has already moved before them.
Positive News This Week
Positive economic news for the U.S. continued to come in this week, including reports that:
- Unemployment dropped again to 4.6%—hitting its lowest level since August 2007.[ii]
- Manufacturing increased for the third straight month.[iii]
- Personal income increased 0.6% in October.[iv]
- Q3 GDP was 10% higher than previously thought.[v]
Despite indications that our economy is doing well, everything of course isn’t perfect in the U.S. Growth remains positive but slow, and while unemployment is low, the measure of people who are underemployed is still high at 9.3%.[vi]
Overall, we continue to see signs that our plow-horse economy may be picking up speed and building greater strength in the process.
Italian Referendum
On December 4, Italians voted against Prime Minister Matteo Renzi’s constitutional amendment that would have reduced their Senate’s size and power while limiting the regional governments’ strength. From Renzi’s party perspective, this move would stop the gridlock so common in Italy’s government while helping to stabilize the country, improve investor confidence, and speed economic recovery.[vii]
As 2016 has shown us with the unexpected victories of Brexit and Donald Trump, populist sentiments are on the rise worldwide -- even in developed countries where populism tends to be more commonly found in developing nations. The Italian “No” vote is another general pushback against the incumbent party and status quo.
No one knows what the long-term outcomes of this vote will be for Italy or Europe. Additional elections and referendum will be had in several other countries that may cause further instability, uncertainty, and market volatility. Yet, today the markets are up despite the outcome of this referendum.
Emotional Considerations
From January’s severely negative stock market to a number of surprising votes, this year has presented many opportunities for emotions to enter investing. Despite the turmoil, markets are up around the world so far this year. Let 2016 provide a good reminder demonstrating that emotions have no place in investing.
Stay disciplined and remember to focus on only what you can control. Hint: it’s not the outcomes of elections or what the market is doing on any given day, week, month, or year. Rather, it's your spending, saving, and selecting a proper investment allocation to meet your goals.
Kevin Kroskey, CFP®, MBA
President & Sr. Wealth Advisor
www.TrueWealthDesign.com
[iii] http://www.ftportfolios.com/Commentary/EconomicResearch/2016/12/1/the-ism-manufacturing-index-rose-to-53.2-in-november
[iv] http://www.ftportfolios.com/Commentary/EconomicResearch/2016/11/30/personal-income-increased-0.6percent-in-october
[v] http://www.ftportfolios.com/Commentary/EconomicResearch/2016/11/29/real-gdp-was-revised-up-to-a-3.2percent-annual-growth-rate-in-q3
[vii] http://www.telegraph.co.uk/news/2016/12/03/europe-holds-breath-italy-heads-polls-critical-referendum/
