All Posts Tagged: futures
This weekly report presents insights from our Global Investment Management team.
Markets, United States citizens, and most of the world watched anxiously as the U.S. election unfolded into a Donald Trump victory for President. Much of the polls, the odds, and the recent run-up in the market signaled that the incumbent party would retain the White House as voters headed into the voting booth. Yesterday, with some of the largest turnouts for early voting, Nate Silver’s Polls-Only model from FiveThirtyEight showed a 71% chance of a Clinton victory which had improved mightily in the 48 hours leading up to the election after the dust settled following FBI Director Comey’s recent headline grabbing announcements regarding the Clinton email scandal.
That probability soon turned toward a Trump victory as key battleground states in the Electoral College fell to the Republican. As Trump’s lead surged, the opposite was occurring in the United States’ futures markets as well as in those markets open and trading, most notably Japan, with the Nikkei Index finishing the session down 5.36%. As the night drew on, the Dow Jones futures market dropped up to 850 points and the S&P 500 was down 5% before both indices made back ground for the opening bell.
Initial volatility has tempered as markets digest the uncertainty that arises as Trump becomes the 45th President Elect of the United States. Markets are unsure of where his policy will take the country and the world, what the impact will be for profits and economic output both here and abroad, and how will this affect a multitude of other factors including currency markets, interest rates, and trade to name a few. When viewed in combination with GOP control over both houses of Congress, and the opportunity to fill a vacant seat on the Supreme Court, this is clearly a watershed event for US policy across the board. That said, the U.S. economy and political structure are enormous, which will make dramatic changes tough to implement in a month, a year, or even a presidency. In our opinion, a significant shift in policies should be expected, but the timing and impact will be moderated given the current system in place.
As market participants digest the news, we remind our clients that this is yet another factor to work through as an investor. Currently the United States economy still has fundamental positives with unemployment near record lows, 3rd quarter GDP advancing 2.9%, and a U.S. consumer which has a better balance sheet and greater wealth than at almost any other time in history. Additionally, both candidates agreed on increasing government spending in 2017, albeit different in the details, which should help expand economic growth next year. There is a great deal that can be looked upon favorably in our country regardless of which party occupies the Oval Office as the next President. We will be tactically positioning portfolios as additional information and opportunities surface which may affect major asset classes and risk and return objectives. We have decreased our exposure to more volatile asset classes over the past several years as the business cycle matures in the US. We still believe a small overweight to equities is warranted as we enter 2017.
Investing involves risk, including the possible loss of principal and fluctuation in value. Economic and market forecasts reflect subjective judgments and assumptions, and unexpected events may occur. Therefore, there can be no assurance that developments will transpire as forecasted. The information in this newsletter is for informational purposes only and is not intended to be investment advice or a recommendation. Nothing in this newsletter should be interpreted to state or imply that past results are an indication of future performance.
Fixed income securities are subject to interest rate, inflation, credit and default risk. The bond market is volatile. As interest rates rise, bond prices usually fall, and vice versa. The return of principal is not guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens.
International securities involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets.
Diversification and asset allocation do not ensure a profit or guarantee against loss.Read More ›
Next week’s FOMC decision on interest rates has attracted as much pre-kickoff commentary as a big game.Read More ›
Bond investors, parsing the FOMC minutes from the July meeting, sensed hesitation about the timing of the first interest rate hike from the Fed and have since soundly convinced themselves that a move in September is virtually off the table.Read More ›