Election 2016: Wealth Economic Update Nov. 13, 2016

U.S. and World News

  • 2016election_360Donald Trump has been elected the 45th president of the United States, defeating Democratic nominee Hillary Clinton. Markets initially reacted in an extreme manner to the downside in the premarket session as this result was not expected or priced in. The downturn was short-lived however, as markets turned solidly green the day following the election and continued its upward momentum through the end of the week.
  • In addition to Trump’s victory, the Republican Party was able to secure majorities in both the House and Senate. This will mark the first time that the Republican Party has held the Presidency and both houses of Congress since George W. Bush took office in 2001. Control of both the House and Senate will give the Republican Party greater freedom to implement its policy platform which stands for less regulation of banks and a repeal of Obamacare.
  • Potential scandal has returned to Brazil after evidence surfaced that new president Michel Temer may have accepted bribes from a construction company. This comes shortly after the impeachment of former president Dilma Rousseff for her role in using illegal loans from state banks to hide the fragile state of Brazil’s finances during her re-election bid in 2014. If the court rules that Temer did accept bribes, he could be removed from office.

Markets

  • This week the S&P 500 rallied 3.87% and closed at 2,164. The Dow Jones rose 5.51% to close at an ALL-TIME HIGH of 18,848. So far in 2016, the S&P is up 7.80% and the Dow is up 10.50%.
  • Interest rates surged higher this week following the results of the U.S. Presidential Election. The 5 year and 10 year U.S. Treasury Notes now yield 1.56% and 2.15%, respectively.
  • The spot price of WTI Crude Oil was down 1.95% this week to close at $43.21 per barrel. WTI Crude is up 7.89% in 2016.
  • The spot price of Gold fell 6.07% this week, closing at $1,225.90 per ounce. Year to date, gold prices are up 15.53%.

Economic Data

  • Initial jobless claims came in at 254,000, a decrease from last week’s reading of 265,000. The Labor Department noted no distortions to the data this week. The four week moving average for claims moved up to 260,000.
  • The University of Michigan consumer sentiment index rose to 91.6 in the November estimate, better than consensus expectations. Both consumers’ future expectations and their assessment of current economic conditions rose during the period. All of the data collected was prior to the U.S. Presidential Election.

Fact of the Week

  • The S&P 500 has now correctly predicted 20 of the past 23 presidential election winners going back to 1928 and every election since 1984. This is based on the three month returns for stocks leading up to the election. If the stock market index is higher in the three month period before the election, it’s a predictor that the incumbent party (in this case Democratic) wins the Presidency and vice versa. The S&P 500 fell -1.9% in the three months leading up to Tuesday’s election, thus continuing the trend as the incumbent party was defeated. (Source: Strategas Research Partners)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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