The outcomes of the election are expected to have a profound impact on tax policy, the federal budget, and how rules get interpreted and enforced. How these issues play out will, in turn, influence interest rates and market valuations. This month's Market Roundup provides our capital market strategists' initial analysis of yesterday's election results. After spending a day watching the markets and meeting with investors, they'll return tomorrow to provide market and investor reaction in a video commentary. Join us again on Friday when Dr. Brian Jacobsen will sit down with portfolio managers Lyle Fitterer and Tom Ognar for a broader market outlook.
From this month's Market Roundup:
The American writer and philosopher Elbert Hubbard once said, “History is just one [darn] thing after another.” (What we have put in brackets was less family-friendly than the word, “darn.”) This has been repeated a few times by such prominent people as Mark Twain and Winston Churchill. If you’ve been paying attention to the economic data and the markets over the past few years, that’s certainly what things feel like: One darn thing after another.
There is an interplay between perception and reality behind Hubbard’s quote and what we’ve seen over the past few years. When people are optimistic, that tends to breed good outcomes. When people collectively get a case of the doldrums, things turn negative pretty quickly. The markets seem to exacerbate this interplay. During the 2007–2009 period, we saw this at work: As things turned down, that triggered people to hunker down, leading to even more negative outcomes. With the November elections in the U.S.; the elections in Catalonia, Spain; and the transition of leadership in China commencing, November could be one of those domino months, when what happens then triggers a cascade of sentiment and outcomes. In such an environment, where the results are outside an investor’s control, we think it’s best to anticipate and adjust: Anticipate the outcomes but adjust to whatever happens. We’re anticipating positive changes.