U.S. equity markets pushed broadly higher in Q4 and for calendar 2016, boosted by investor optimism that President-elect Trump’s administration will usher in a wave of business-friendly initiatives including reduced government regulation and lower corporate tax rates.
With just a couple weeks left to the year, we naturally ponder the main events of 2016 and how they might shape 2017. We try to abstain from political commentary and limit our opinions (here anyway!) to potential investment consequences from policy decisions.
Broadly speaking, the past week made fools of professional forecasters. Heading into the November 8th election, Hillary Clinton was the consensus favorite to win the presidency, with most polls pegging her chances at greater than 65%.
As you all know, the results of the US Presidential election were not what investors around the world anticipated. Surprise and uncertainty breeds volatility. Similar to the aftermath of Brexit last June, when UK voters approved to leave the European Union, markets around the world and the dollar are reacting negatively as we write this note.
In economic news, it was pretty much more of the same. The US economy continued to grow at a tortoise pace during the 3rd quarter. On a positive note, wage growth is accelerating and residential real estate values continue to increase around the country, which bodes well for the future.
The Los Angeles Times published an excellent long form series last week on the root causes of California’s burgeoning public pension funding gap. It is an interesting backstory characterized by financial myopia, cognitive bias, and endemic conflicts of interest.