Market Analysis

The market’s reaction to the elections has been positive so far and this should not be surprising.  The market’s internals were improving weeks before the election and the results got rid of something markets do not like, uncertainty, The most common question we get around election time, as advisors, is “How do you think the election will affect the markets?”  No one really knows the answer to this but if you look back in history the answer is “not much.”  We have harped on the fact that the greatest bull market since the nineties was building momentum, and it continues to do so.  But bull markets do not just rally in similar fashion throughout their duration, they go through phases.  As we have mentioned before, the most notable change in the character of the overall bull market rally is when the “point of recognition” occurs. This is when a majority of investors believe in the bull market and the attitude changes from a fear of losing principle to a fear of missing out on the rally.  This was what happened in 1995-1998 when the Dow Industrials rallied 158%.  Did the recent election aftermath trigger this phenomenon in this bull market? We’ll have to wait and see.

The so-called “Market Effect,” which says the market influences many aspects of the economy including consumer choices, begs the question of the chicken and the egg. Which comes first, the market’s rally or the investor’s optimism?  We believe it is a cycle that repeats itself time after time with different reasons for the emotions that make stocks rally and fall.  We believe we are in a time where optimism will win out and will do so for a long time to come.

Gary and Dianne

This report is provided as a general market overview and should not be considered investment or tax advice or predictive of any future market performance.

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