The election results are in with Republicans controlling both houses (with slimmer majorities) of Congress and the Presidency. As I watched it all unfold into the early morning hours, it became clear the historic and unexpected election results caught pundits and the markets off guard.
The best comparable event in recent memory is the unexpected Brexit vote. Similar to the Brexit, the immediate reaction is to drive risk asset (stocks) prices lower and safety assets (gold) higher. I have written that the markets don't like uncertainty and that is especially true in the short term. Within two months of the Brexit, most assets had recovered in price, with the exception of the British Pound. Longer-term impacts can be much more fickle to determine and require more specific analysis.
One key takeaway from President-elect Trump's acceptance speech is the amount of fiscal stimulus for infrastructure that is likely to occur. This is a bipartisan issue and should have wide support. The impact of this stimulus is to increase federal debt, and in my opinion, will quicken the increase in Treasury yields especially at the long end of the yield curve.
With regards to stocks, I favor buying stocks on significant dips, but would be wary of certain stocks that could be impacted by more restrictive trade deals.
Much more to come from the PMAM team over the coming weeks about the longer-term impact on markets and the economy.
< Go to Viewpoints
The material provided here is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management.
This material is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.