Content provided by Grant Engelbart, CFA, CAIA, CLS Portfolio Manager
It’s no secret that markets hate uncertainty. Trump presents uncertainty – and markets reacted that way overnight. S&P 500 Index futures were down nearly 5% at one point, but have come screaming back to trade positive on the day. Sound familiar? Following the surprise Brexit vote, markets reacted in similar fashion.
Why the snapback? Despite the uncertainty, Trump has made it clear that he wants fiscal stimulus. Whether through infrastructure spending or tax cuts, in general these policies are supportive of economic growth. Interestingly, one of the largest gainers on the news was copper – moving higher by nearly 4%. Copper is a classic gauge of global economic growth.
Despite the lack of historical precedent, history can give us some guidance. On average, markets have traded lower the day following a presidential election, so it shouldn’t be all that surprising that we opened lower. It is commonly suggested that a Democrat in the White House is favorable for stocks, but actually, historically, a Republican in the White House with a friendly Congress has been quite strong for equities.
Regardless of your feelings on the election, keep in mind that one person does not run our country. The forethought of the checks and balances system has gotten us to where we are today. As global asset allocators, we will continue to search for opportunities in all asset classes – and there are plenty of opportunities in today’s market. There will always be something to worry about and reasons to keep money on the sidelines.
The views expressed herein are exclusively those of CLS Investments, LLC, and are not meant as investment advice and are subject to change. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Past performance is not a guide to future performance. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.