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:
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.
This year has been nothing short of crazy. Think about the themes that have driven this market so far this year:
Yet, the markets are up for the year in spite of significate volatility. The punches have been thrown and we are still standing. Believe it or not, this year is actually following a pretty succinct historical script. Absent an election year, equity markets generally trend higher until the seasonally weak September/October months. However, during an election year, equity market weakness tends to occur during the summer months and subside as the November election draws near. Historically, markets then rally into year end and the market so far has followed this pattern. With this precedent we believe the markets could trade higher into year end.