Greetings from Channel Wealth,
The election is over and once again markets have done an impressive job of processing long odds and disparate information. We wanted to share a few thoughts from our post-election Investment Committee meeting.
Our investment thesis and exposure to stocks and bonds will remain very similar to what it was yesterday. Good companies and secular growth stories have not changed overnight. We are reviewing our current holdings given new leadership and resulting policy changes on the horizon. We have already made some minor adjustments and anticipate additional changes prior to the end of the year. For example, we have reduced exposure to emerging markets while increasing positions to industrials and financials.
Key takeaways:
- Volatility has been surprisingly low. There was a clear winner, which almost nobody predicted would happen. As a result, there was no interim stage allowing for markets to vacillate. We view this as a positive for markets.
- There’s less uncertainty. Yesterday the markets did not know who was going to be president. Today we do. That is perceived positively by investors for now.
- There is a lot of cash on the sidelines, investors may feel more comfortable allocating to the markets.
- There is an expectation that bank regulation is going to become less burdensome. As a result, regional banks (and most large banks as well) had a banner day. This was compounded by small and mid-cap size companies’ outlook looking brighter.
Sector commentary:
- The US Dollar is trending sharply stronger (source: yahoo finance).
- Cyclical companies and sectors outperformed on day one. This is related to the expressed focus on US oil production and manufacturing. Oil companies and Industrials have done well.
- Small cap companies had an impressive rally. There is an expectation that future tariffs will be supportive for smaller companies who face competition with imports.
- Interest rates moved higher for longer dated bonds; likely because of an increased expectation that we will be running a higher deficit and will have more debt to service.
Please reach out to your advisor if you have any specific questions.
