The results of the November 8, 2016 U.S. presidential election have not changed our long-term outlook for the U.S. economy. Elections do not in and of themselves change economic trajectories, policies do. We need to wait to see which policies Trump moves forward with and the details of those policies. Our Recession Watch Dashboard continues to point to an overall low risk of recession within the next year.
This week we reflect on Donald Trump’s surprising victory and the stock market reaction. With Election Day behind us and the benefit of several days to digest the news, we reflect back on what was quite a week for the stock market. Here we offer some perspective on the trading week and share our views on some of the most politically sensitive asset classes and sectors.
The federal deficit and debt have not received much attention on the campaign trail this election cycle. Our August 22, 2016 Weekly Economic Commentary, “Fiscal Policy — String Theory,” provides some insight into the plans floated by both Hillary Clinton and Donald Trump to cut and/or reform taxes and make significant investments in the nation’s infrastructure. The deficit and the debt did get a brief moment in the spotlight during the presidential debate season in September and October 2016, but have since faded into the background amid the general rancor of this year’s campaign. Regardless of who wins the election this week, the new president and new Congress will face a rising deficit and many unanswered questions on the direction of the deficit and debt in the coming years and decades. In this week’s commentary, we will answer several of the most frequently asked questions that come into the LPL Research Department on the deficit and debt.
With the election fast approaching, we present our election playbook. With Election Day just 15 days away, and the three presidential debates behind us, investors want to know what the upcoming change in power in Washington might mean for their portfolios. Here we offer our election playbook, including some potential investments that could possibly receive an election boost.
Both presidential candidates have discussed energy independence as a goal for their administrations, though their actual platforms speak more to their broad policy orientations than to any real specifics. We doubt that that the United States could be truly energy independent for any sustained period. Given the high costs of U.S. energy production relative to other parts of the world, it’s unclear whether true energy independence would be economically sensible. However, the U.S. shale revolution has fundamentally altered the economics of the global oil market and may keep prices subdued for years to come. Investors looking for opportunities in energy will find them, but they will have to be more selective than in years past.
We take a closer look at market technicals and sentiment this week with the historically volatile second half of October upon us. Although there has been some near-term volatility and equity weakness, the longer-term technical on equities continue to look very strong. We will show this by examining three different technical indicators that, combined, show the potential for positive longerterm signals for equities. Turning to overall market sentiment, the overwhelming evidence suggests there is still a significant amount of worry about future price returns. From money leaving equity funds, to market sentiment polls showing an unusually high level of worry this close to all-time highs, sentiment could potentially be a nice contrarian reason to remain bullish.