Tahoe-Truckee Market Beat: Post-election recap
November 16, 2016
Now that the presidential election is finally over with we can get back to watching games on TV without getting bombarded by all of those political ads. I'm looking forward to that.
The election was an interesting one; it looks like voter turnout was the lowest in twenty years at about 55%, down from a high point of 64% in 2008. The final turnout number won't be known until all of the votes are tallied.
The stock market rallied after the election results were announced, posting the best week in five years. The Dow Jones Industrial Average had a one week gain of 5.4% and hit record high levels. The Dow's run-up was led by Goldman Sachs. The S&P 500 posted a one week gain of 3.8%, but the tech heavy NASDAQ was only up 1.9% for the week and actually dropped -1.1% in the three trading days following the election.
There was some fairly strong sector rotation after the election, too. Financials, Industrials, Materials and Consumer Discretionary all posted gains, while we saw some selling in Utilities, Information Technology and Consumer Staples.
Treasury bonds have had a very rapid sell off post-election. The yield on the benchmark ten year US Treasury bond has risen to over 2.2%, the highest in several years. Bond yields rise when prices fall. There has been some speculation that foreign entities, particularly China have been selling some of their vast holdings in US Treasuries. This kind of selling can cause interest rates to rise pretty fast. The US dollar index has also risen, which is a deviation from its normal behavior, typically interest rates fall when the dollar rises, not vice versa.
Pharmaceutical stocks posted a strong rally in anticipation of probable changes to the Affordable Care Act. Coal and prison stocks also posted good gains. Gun stocks actually dropped quite a bit. Gun stocks have performed very well over the last several years as gun sales hit record levels. Consumers have been buying up guns and ammo in anticipation of new regulations that limit purchases. Apparently the market is not forecasting new changes in gun laws.
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We may see some tax law changes over the next few years, there could be an incentive for corporations to repatriate some of their foreign cash for a modest penalty. There will most likely be less incentive for corporate inversions in the future, too.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.