Well here we are . . . . . 2016 has ended, and was this ever a year for surprises. The election result obviously surprised a lot of people, but where the surprise continued for most was in the stock market. Who would have predicted such a thing as a “Trump Bump.” But that is exactly what we saw in the 4th quarter.
If you were heavy into equities in the 4th quarter, you are wearing a smile on your face now, never mind your political affiliation. The DOW closed the year with a bang up in the 4th quarter alone a whopping 7.94%, putting DOW 20,000 in close range. And just when you were thinking “how can that be topped”, the Russell 2000 (an index with a high percentage of small-cap companies) rises 8.83% in the same period.
One has to remember that we are in the 8th year of a bull market that began after what many have called the Great Recession. And the question on everyone’s mind is . . . how long can this upward trajectory continue? Well in my humble opinion, I believe the bull market still has legs for the following reasons. . . .
First, the FED is committed to an orderly progression of rate increases, which will allow markets and companies to adjust mid-cycle.
Second, the promise of a less regulatory environment in Washington has business leaders almost giddy with anticipation.
Third, the initial willingness of large manufacturers to reconsider plans to produce products abroad, and bring those manufacturing jobs back to the U.S., has greatly boosted previously depressed GNP estimates, and finally
Fourth, the projected return of consumer confidence, due to increased employment opportunities and a more favorable tax policy of the new Administration.
Could there be some flies in the soup, so to speak?? Sure, the international component is always a wild card with the likes of Brexit, China’s growth cooling, North Korea’s temper tantrums, Russia rising and continued volatility in the Middle East. But the U.S. continues to offer the best / safest place to invest, and that alone will continue to drive demand for stock in companies producing quality products and services. So buckle up, 2017 should prove to be an interesting ride.
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