Pundits, pollsters and the mainstream media got it wrong!! Donald Trump was not supposed to win the 2016 presidential election and, if he did, markets would roll back by 5%-10% in its aftermath. However, following a Trump victory – along with a solid Republican Congress – equities in the U.S. rose nearly 4% on the week. The Dow Industrials had its best week since 2011 and set a new all-time high closing up 5.4% to 18,848. Gains were concentrated primarily in financial stocks (looking for a reprieve from over-regulation); industrials, which will benefit from a perceived growing economy, defense spending and investment in infrastructure projects; and healthcare, with a less likelihood of price controls on drugs. Transportation stocks, led by road and rails, were in the green by nearly 6.25%. Hospital stocks, however, retreated as Obamacare will be one of Trump’s first fixes, but healthcare insurance stocks soared. Utilities fell 3.5% on inflation fears and more interest rate hikes in 2017 and safe-haven telecoms didn’t do much better. Despite a drop in oil prices, energy related stocks moved ahead by 2.5%, including pipeline MLPs. Solar and other renewable energy plays, however, gave back nearly 5% on the week.
The yield on the 10-year U.S. treasury climbed 20 basis points on Wednesday sending bond prices lower and the yield on the U.S. 30-year surged 33 basis points finishing the week at 2.95%, its highest level since early January. The dollar soared over the past three days, as well. Gold, which was up in the early stages of the election returns, made an about-face and gave up 6.5% from its highs to close at $1,227.13. Now, with the election in the books and the economy seemingly on the mend, the case for a December rate hike is building, assuming a degree of stability persists in the financial markets.
On the earnings front, retailers will be pouring in results including aggressive choice Foot Locker with a consensus estimate for the third quarter of $1.10 vs. $1.00 a year ago and Applied Materials ($0.65 compared to $0.29 in last year’s fourth quarter) will report on Thursday. Fierce rallies come and go. The weeks ahead will be quite volatile to say the least as investors assess the longer-term effects of new initiatives, policies and tax proposals. Prospects for equities are still decent, especially if investors can focus on the fundamentals.
Today’s Trivia Question: Netscape Communications, provider of the once No. 1 Internet browser Netscape Navigator, is now owned by? AOL/Verizon, Mozilla Foundation, Alphabet (Google) or Red Hat.