Sunday, November 13, 2016

Stock market this week could reflect real reaction to the election

What U.S. equity market investors think about the election will become more clear this week.  There has been a weekend to consider more than a short term impact.  With year end in sight, investors for visible portfolios(mutual funds, large pension funds, state run funds...) will be conscious of how the portfolios that they are assembling will look at year end.  Investors in general will be looking to build in areas that may benefit from a changed administration.

Bank stocks surged this past week.  That may be just the beginning.  Equities related to infrastructure building may also be seen as a store of value with little downside and look attractive to medium term investors.  The especially interesting area to watch will be the most globalized companies, many tech, to see if the market believes that trade barriers are coming, or whether that is seen as election posturing rather than something that will be implemented near term in any serious or widespread manner.

Volatility can be expected.  We are have not yet left the crazy zone of politicians and newly empowered officials making impromptu statements that aren't thought through.  The next few months could be full of that, and maybe the next four years if Twitter becomes a late night source of policy communication.

Emerging markets took a hit last week.  Skittishness there is likely to continue.  Bonds don't look like the best place to be.  This is a week to watch, pre-Thanksgiving week, post election trading that might make for a highly active market.

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