After an unpredictable campaign, Donald Trump is the President-Elect of the United States. The markets initially were quite negative during election night, with futures dropping as much as 800 points, before recovering when the US markets opened and being as much as 250 points higher that day. Since then, the Dow has reached an all-time high. But will it last?
Here are the things that I would watch in the near term.
- Janet Yellen & Federal Reserve = Many believed that the economy has recovered enough for interest rates to be increased in December. For some time, I have thought that they would wait for 1Q17, as they would want additional confirmation of consumer strength by seeing how the 2016 holiday shopping season progresses. The unexpected result of the election only confirms that position for me.
- Market Volatility & Economic Uncertainty = The election night volatility and recovery was essentially more than a 5% swing within 24 hours, and a subsequent rally has continued. It may be somewhat overdone, because we still have the same economic situation that existed on November 7th. Something must give consumers confidence to continue spending as well as corporations investing in capital expenditures.
- Congress = The GOP will control the White House, the Senate, and the House of Representatives. However, more than a few distanced themselves from Trump for a variety of reasons. How will Congress work with President Trump after such a rough campaign?
For most investors, a prudent approach is to answer some basic questions. What are you trying to accomplish? How long do you have for that goal? How much risk are you willing to take on? If you're not on track, what options are on (or off of) the table?
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