Healthcare repeal and replace, deregulation, tax reform, the fiduciary rule… these are all the hot topics running across the airwaves since a new administration stepped into The White House. When Donald Trump won the presidency back in November, it was a widely held belief on Wall Street that the market would likely find a top and come crumbling down. I was in that camp as well, and certainly wasn’t willing to take the risk to be “all in” the market prior to such a historic (and potentially catastrophic) event.
Needless to say, a crash didn’t occur. Quite the opposite, actually. When markets trend upward, they do so in a manner analogous to a jogger jogging uphill. It’s faster than a crawl or a walk – a nice, easy, steady climb with occasional setbacks to grab a quick drink of water. From election day through March 1st, the market did not jog – it sprinted up the hill until finally, it became too exhausted to sprint any longer.
This isn’t a bad thing. Markets sometimes sprint, but when the 200-meter dash ends, the market’s heartrate climbs, it starts to overheat, it puts its hands on its knees, and it needs a whole lot more than a drink of water. This is why the month of March was such a boring month. Especially following a few months of sprinting – the market dropped in March, just to catch its breath…completely normal.
The chart below shows the average stock market returns for the first 100 days of new presidents since 1953. Notice how democrats fare better at a +3.5% return while republicans typically falter to the tune of -0.2% during their first 100 days. The average is obviously in the middle, but what I find interesting is this year’s results thus far. Looking forward, the historical data tells us that the market tends to do well under republican presidents in the month of April.
As of yesterday, we’ve made it through 75 of the first 100 days of the new administration’s work. Not only is the S&P 500 up 3.9% year-to-date, but the market has largely shrugged off the uncertainty regarding the failed vote on last month’s healthcare replacement bill. Employment numbers continue to surprise to the upside and it seems that investors remain optimistic about potential pro-growth policies to come.
The million-dollar question remains, “Will the republicans work together?” If they do, it could certainly assist in giving 2017 a boost of confidence to investors of U.S. stocks both here and around the world. If not, the uncertainty that would transpire could potentially cause this metaphorical “runner” to break an ankle and end up in the ER.
For now, both long and intermediate-term trends in the U.S. stock market continue to look strong and international markets look to have potentially turned a corner. Interest rates seem to be forming a long-term bottom, a bad sign for bonds, which look neutral at best at least for the moment.
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The opinions mentioned in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial adviser and strongly consider interviewing a fee-only financial advisory firm, prior to investing. Past performance is not guarantee of future results. Economic forecasts set forth may not develop as predicted. The views and opinions expressed in this commentary are those of Adam D. Koos, CFP® and do not necessarily represent the views of TD Ameritrade and its affiliates. Investing involves risk including loss of principal.