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Trumpflation

Weekly Commentary, 11/14/16 to 11/18/16

The positive tone for stock prices carried over for another week following the surprising presidential election. On price basis the Dow Jones Index added +0.11% to last week’s gain of +5.36%.  The S&P 500 Index tacked on another +0.82% to last week’s advance of +3.80%. Small cap stocks as measured by the Russell 2000 Index rose +2.56%, to a new record high, on top of last week’s impressive advance of +10%.Trump ran on a platform calling for more protectionism which could lead to less global trade. Less global trade is believed to benefit smaller companies, which typically generate less sales overseas, than larger U.S. companies. 

With Republicans controlling the House and Senate, investors seem to believe President-elect Trump’s prospect of large deficit spending and lower taxes will boost U.S. growth pushing up inflation. The yield on the benchmark U.S. 10-year Treasury note shot up to 2.33% versus 1.87% on November 8 marking one of the largest increases in 7 years. On the back of rising rates the U.S. dollar rose to a level not seen since 2003. 

Contributing to the pressure on interest rates were comments from Federal Reserve Chairwoman Janet Yellen that the U.S. economy is strong enough to withstand an interest rate rise soon. Her comments bolstered expectations that the Fed will raise rates at its next meeting December 13-14. 

Recent economic data releases support the argument for U.S. economic growth and higher equity prices. October housing starts jumped 25% from September, while jobless claims dropped to 235,000, the fewest since 1973; wages rose 2.8% in October, their fastest pace since 2009.

Market technicals confirm the strength in U.S. equity prices. Both the S&P 500 Advance-Decline Line and the number of stocks trading above their 50 and 200-day moving averages continue to improve. The Dow Jones Index and the S&P 500 are approaching record levels and psychologically important round numbers, 19,000 and 2200.

Following an emotional and knee-jerk reaction to President-Elect Trump’s election victory, the markets will continue to adjust the new investment landscape. The reality is this: no one really knows what post-inauguration policies President-elect Trump will pursue or what policies he can get passed through Congress. We do know that political and investment strategists are not very good at predicting the future. We will stick to our disciplined investment processes seeking to provide reasonable growth in client portfolios while attempting to mitigate risk.    


Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money. The investment strategies presented are not appropriate for every investor and financial advisors should review the terms and conditions and risks involved. Stadion’s actively managed portfolios may underperform during bull markets. Some information contained herein was prepared by or obtained from sources that Stadion believes to be reliable. There is no assurance that any of the target prices or other forward-looking statements mentioned will be attained. Any market prices are only indications of market values and are subject to change. The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock price. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. It is the most widely quoted measure of the overall performance of the small-cap to mid-cap company shares. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. It is not possible to invest directly in indexes (like the S&P 500) which are unmanaged and do not incur fees and charges. The U.S. 10-Year Treasury Note is a debt obligation issued by the United States government that matures in 10 years. The Sharpe ratio measures the excess return per unit of deviation, or risk. The core personal consumption expenditures index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices. Any references to specific securities or market indexes are for informational purposes only. They are not intended as specific investment advice and should not be relied on for making investment decisions.

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Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.