Investment Commentary –November 9th, 2016
Market Indices as of Market Close November 9th, 2016
Dow 18,589 (6.68% YTD)
S&P 2,163 (5.84% YTD)
NASDAQ 5,251 (4.87% YTD)
Global DOW 2,411 (2,033 week low/high 2,489)
10-year Treasury 2.07 (1.32 52 week low /2.35 high)
Gold 1,276 ($1,053 52 week low /high $1,384)
Oil $45.40 ($34.06 52 week low /high $53.62)

U.S. stocks finish higher after Trump’s surprise election victory

U.S. stocks finished higher on Wednesday, led by a surge in financial, health-care and industrial stocks, as investors bet President-elect Donald Trump would increase spending on infrastructure. Stocks opened lower following a sharp drop in futures overnight, as the prospect of a Trump presidency rattled markets. But they soon recovered, lifting the Dow Jones Industrial Average to its highest closing level since August. The blue-chip gauge gained 256.30 points, or 1.4%, to 18,589.04, led by Pfizer Inc. PFE, +7.07% and Caterpillar Inc. CAT, +7.70% The S&P 500 index SPX, +1.11% advanced 23.63 points, or 1.1%, to 2,163.19. The Nasdaq Composite Index COMP, +1.11% gained 57.58 points, or 1.1%, to 5,251.07. Gains were constrained by a drop in utilities, consumer staples and technology shares.

Fed to proceed with December U.S. rate rise despite Trump upset: Reuter’s poll
A stunning upset by Republican Donald Trump in the U.S. presidential election may have set off a few tremors in markets but the Federal Reserve is on course to raise interest rates next month, a Reuter’s poll of economists showed.
While there was no prior official view on what the Fed would do if Trump won in a contest where nearly every poll of U.S. voters pointed to a victory for Democrat Hillary Clinton, many had said ensuing uncertainty from an upset might put up a roadblock.
But roughly 85 percent of 62 respondents in a survey taken on Wednesday after the shock vote said the Fed would go ahead with a rate rise, it’s first in a year. Forecasts came from several of the Wall Street primary dealers as well as European analysts.
“We think economic conditions and Fed rhetoric both point to going in December,” said Jeremy Schwartz, economist at Credit Suisse in New York.
When the Fed last hiked, its first in the current cycle off the zero bound, it expected to have delivered four more by now, but was thrown off course several times throughout the year. Inflation has not picked up as the Fed expected, either.

“We are not going to rush into changing our call for a rate hike at the December meeting,” noted Jim O’Sullivan, U.S. economist at High Frequency Economics, the most accurate forecaster on the U.S. economy in Reuters polls last year.

U.S. Stocks Surge as Banks, Drug makers Rally amid Trump Victory
U.S. stocks rose in heavy trading, with the Dow Jones Industrial Average briefly eclipsing its all-time closing high, as shares of banks to heavy equipment manufacturers rallied amid speculation Donald Trump will pursue business-friendly policies.

Health-care shares and lenders surged as investors unwound bets that a win by Hillary Clinton would bring stronger regulatory scrutiny. The SPDR S&P Biotech exchange-traded fund rose the most since 2008, while Pfizer Inc. and Merck & Co. jumped at least 6 percent. JPMorgan Chase & Co. rose 4.6 percent to a record, and Goldman Sachs Group Inc. had its best one-day gain in 4 1/2 years.
Volatility Cools
An early knee-jerk selloff in global stocks and a rally in haven assets reversed on wagers that Trump would increase fiscal spending to spur economic growth, and as he struck a more conciliatory tone in his first speech as president-elect. The CBOE Volatility Index tumbled 23 percent Wednesday, the most in five years, as the measure of market turbulence retreated from a four-month high reached on Friday.

A Trump victory had been portrayed by analysts as having the potential to unhinge markets banking on a continuation of policies that coincided with the second-longest bull market in S&P 500 history. While Republican control of both houses of Congress may enable the party to enact sweeping legislation that would be considered pro-business, concern persists over the impact from Trump’s pledges to clamp down on immigration to the U.S. and renegotiate free-trade agreements with countries including Mexico.

“People focus on the fact that his acceptance speech kind of changed the direction of the market,” said Krishna Memani, New York-based chief investment officer at Oppenheimer Funds Inc., which oversees $223 billion. “It was far more conciliatory and far more fiscal-focused than these acceptances typically are — that made a world of difference.”

THIS DAY IN FINANCIAL HISTORY: November 9, 1903 Rich Man’s Panic
On this day in 1903 the Dow dropped to 42.15. The stocks of industrial companies dropped to single digits and a financial crisis ensued for the rest of the year. This drop in the market was later coined the “Rich Man’s Panic.”

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.