Disclaimer: This client memo is to report on the progress of the markets and the effects of the election. It is no way to mean or opinionate anything political.
It's been less than two weeks since the inauguration, and we are seeing many changes due to the new administration, world opinion and market reaction. The so called "Trump Run" of the market was not solely due to the person elected (and is settling down) but to many unknown factors including taxation, immigration, trade balancing, and just about anything and everything you read about in every news outlet. However, the luster has worn off and reality is setting in- you can think and hope anything, but facts are facts... and here are some of the facts that are causing the volatility of the market. I know it may be a little technical, but stick with me...
Tuesday, of the 21 S&P companies to report earnings, 16 of them missed on sales. Overall so far, only 46% of those reported thus far are beating top line sales as opposed to a projected 59%, showing that expectations are higher than reality. Part of this is related to the uncertainty over reductions in corporate taxes, part of it that retail sales were just not as high as anticipated. Uncertainty is a big factor in the corporate world, and we are indeed in an uncertain time. Promises don't make for better earnings- only a strong economy can do that. The new administration definitely hit the ground running, but has also created confusion and ambiguity for both corporations and we citizens as well. The issues of a possibility of a trade war looms on the horizon, and the threat of a 20% tax on Mexico has its ramifications: as an example, if it cost Ford 20% more in taxes to bring in a car from Mexico, or the same on avocados and tomatoes, (roughly 75% of the USA consumption) it will add that much more to our weekly grocery bill. With mortgage rates rising, last month applications were down for the first time in many months. The current travel bans just put into place will have a projected effect on corporate hiring and retention of talented employees, as well as college and university enrollment- also affecting their bottom line.
There is much infighting with the Powers that Be, further leading to delays in decisions that affect the very lives of all Americans at every level. Healthcare coverage is a big uncertainty, and the markets are affected in the pharma, healthcare, and bio sectors as a result. Talk surrounding the "Dodd-Frank Rule" which would give the states more control over the banks than the Feds is up in the air, effecting that sector of the market. Talk and comments about improving the country's infrastructure is moving the markets in all sectors involved in building- steel, transportation, construction…but then it reverses when another public release is to be had. It is truly an in-flux time for all of our lives on a day-to-day basis.
It's a confusing, confounding and uncertain time for the markets, to say the least. Time will tell, and as the story unfolds, so will our strategies and approaches to helping you achieve your goals and frustrations. Please feel free to call any time with any questions-and remember- Spring will be here before you know it!
Hey... I had to end with a bright point!
