A November Overview
The markets initially knee-jerked lower on the news of a president elect. However, the markets quickly reversed and finished decidedly positive the day after the election. Historically, a president’s policies, regardless of party, will not work into economic reality for some years post implementation. So, currently we are not as concerned with the outcome of the election as we are with the health of the economy and the passage of the actual event of Election Day.
That said, there are a few drivers we see going forward:
- It’s a foregone conclusion that the Federal Reserve (FED) will raise interest rates in December. Rates need to start ticking up because we are starting from such a low historical base.
- Inflation is low, but it’s starting to tick up. The CPI is currently over 2%, which is the first time we have seen the reading this high in quite some time. Rising inflation would force the FED to raise rates faster, so we want inflation to stay tame for the foreseeable future.
- The global economy slowed down during the middle of the year. But, many of our leading indicators point to an economy that’s getting ready to experience good growth.
We have been nibbling on some of our favorite positions and will continue to invest as we see opportunities. One of the areas that will actually be helped by rising rates is the financials. So, we have that group on a watch list for potential investment.