November 4, 2016. By Richard Greene:
Despite the crazy election rhetoric, the third quarter was the best of the year so far for the market and while economic data was mixed, consumer confidence reached post-recession highs. While economic conditions were relatively unchanged during the quarter the equity markets did manage solid gains. For the first time in several quarters small cap stocks and indices such as the NASDAQ and Russell 2000 outpaced the large cap S&P 500 Index by considerable margins. Increases in employment, personal income and household net worth have contributed to consumers’ willingness to spend. The consumer’s resiliency has also been aided by accommodative interest rates and low energy and commodity prices. It appears that the consumer needed convincing that energy prices would remain low before they were willing to spend the low energy prices “dividend”.
The two elephants in the room at this point are obviously next week’s election and if December finally sees an interest rate increase. The lack of volatility in the market suggests to many that a Clinton victory, as well as a 25 basis point rise in interest rates, is pretty much baked into stock prices. Economic policy under a Clinton administration may be deemed somewhat status quo rather than be radically different; however the election results and future policy remain to be seen.
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