Analyzing the Markets Since the 2016 Election

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Now, a bit more than a year since the 2016 presidential election, let’s assess what the markets have done since then.

It should come as no surprise, that the U.S. stock indexes are up sharply. The key indexes each returned more than 20% but the increase isn’t across the board.

The Nasdaq 100 led the way with a 32.54% jump for the year following the election of President Trump, while the Dow Jones Industrial Average was just behind at 30.77%. The S&P 500 was well behind with a 22.98% increase, which would be outstanding in almost any other year.

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The S&P Midcap 400 trailed the large company indexes to return 22.48%. But the two major small company stock indexes beat the S&P 500.

The S&P Smallcap 600 climbed 24.67%, while the Russell 2000 soared 25.01%.

Growth stocks beat value stocks, whether comparing large companies, mid-size companies, or smaller companies.

For example, the S&P 500 Growth index returned 26.60% to beat the 18.02% rise in the S&P 500 Value index. In midcap stocks, growth beat value by 24.49% to 19.36%. But the margin was narrowed among small companies, with growth returning 25.67% versus value’s 23.07% gain.

Within the S&P 500 sectors, only telecommunications lost value as it dipped 5.14%. Laggards that notched small gains included energy, up 3.66%, and consumer staples, climbing 5.78%.

The leading sectors, by wide margins, were technology, which rocketed 36.08% and financials, which zoomed 32.59%. The other sectors returned between 16% and 25%.

International stocks also have gained strongly since the last U.S. presidential election.

The emerging markets index increased 25.54%, while the developed markets index, EAFE, rose 23.70%. Among major countries, Italy led the global pack with a 41.71% gain. France and Germany were next with gains just above 30%. Laggards included Mexico, which dropped 4.28%, and Brazil, which rose just 5.63%.

Other assets failed to match the performance of stocks. A broad-based commodities index returned 11.26%, but there was a lot of dispersion within commodities. Oil gained 13.07%, while natural gas lost 5.71%. Gold dipped 0.42%, while silver slipped 8.33%.

U.S. bonds had a very rough time after the election as interest rates climbed. Bonds, however, recovered much of their losses in recent months. Long-term treasuries fell 2.14% for the year following the election, while intermediate treasury bonds slid 1.74%.

Most other bond categories had gains of less than 1%.

Many factors contribute to changes in the markets and economy, but the consequences of the presidential election were a major one.

The Trump administration changed the regulatory climate, and the Senate approved legislation to change the tax code and reduce rates to produce a $1.5 trillion tax cut for corporations and most individuals in the very early hours on Saturday, Dec. 2.

The House passed its own version of a tax bill on Nov. 16. Next, House-Senate conferees will meet with a goal of ironing out their differences to produce a final bill. President Trump is expected to sign the legislation once the final bill reaches him to mark a major win for his administration and good news for investors.

The Fed also managed monetary policy well over the last year. These factors so far overrode potential negative consequences of the Trump administrations new trade policy and other policy changes.

I encourage you to check out my public blog.

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Thank you.

Until next time,

Robert Carlson

Robert Carlson is editor of the monthly newsletter, Retirement Watch. In it, he provides independent, objective research covering all the financial issues of retirement and retirement planning. Carlson also is Chairman of the Board of Trustees of the Fairfax County Employees’ Retirement System and the founder of Carlson Wealth Advisors, L.L.C.