Latest / Markets with Megan: A Quick Financial Markets Update / Trump's Election Sparks Market Surge and Economic Speculation | Episode 187 | 11-06-14
Transcript
- 0:00Megan Horneman: The results are in and the markets surely do like it.
- 0:02Megan Horneman: It is Wednesday, ovember the 6th, and we're looking at a tremendous rally in the equity market after we got the results from the presidential election last night.
- 0:13Megan Horneman: So, as everybody knows, president Donald Trump was named the 47th president, and what we're seeing today in the market is a reaction that's very similar to what we saw in 2016.
- 0:24Megan Horneman: Now, it's still very early.
- 0:25Megan Horneman: The Senate also flipped to the Republican Party.
- 0:29Megan Horneman: The House is still being decided upon, but it is looking like it will go to the Republicans as well, so it'll be a full sweep by the Republican Party.
- 0:36Megan Horneman: Now what does this mean?
- 0:38Megan Horneman: Going forward?
- 0:39Megan Horneman: Well, first of all, let's focus on what's happening today and why the market's rallying the way that it is.
- 0:43Megan Horneman: Today, we're seeing the Dow Jones up.
- 0:46Megan Horneman: It's up over 1,000 points.
- 0:48Megan Horneman: This is the biggest point day move we've seen since March of 2020.
- 0:52Megan Horneman: But what we're also seeing is some big moves in the small cap space the Russell 2000,.
- 0:57Megan Horneman: The Russell 2500 as well, rallying In the S&P 500,.
- 1:02Megan Horneman: The sectors that are benefiting the most from these results have been financials, industrial and energy, with real estate and staples being the main sectors that are negative for the day.
- 1:15Megan Horneman: This looks.
- 1:17Megan Horneman: If you go back and look at the week of the election in 2016, it was a very similar story.
- 1:22Megan Horneman: We saw rallies in small caps, we saw sell-off in bonds, we saw rallies in the mid-caps as well, and the market right now is focusing on a couple things that Trump campaigned on.
- 1:34Megan Horneman: First of all, he's talked a lot about loosening regulations.
- 1:37Megan Horneman: That's why you're seeing things like financials, energy and industrials.
- 1:41Megan Horneman: They're doing well.
- 1:42Megan Horneman: Looser regulations he worked on this in 2016 as well as kind of pulling back some of the Dodd-Frank laws, so this is beneficial for the financials.
- 1:51Megan Horneman: The small caps tend to be more domestic oriented companies, so they're rallying because the hope is there'll be better economic growth and they're not as tied to the risk of tariffs that Trump has campaigned on as well.
- 2:05Megan Horneman: Now, as we look forward, we'll continue to monitor what's going on with the House and the Senate and try and get some more indication on what Trump's first focuses will be.
- 2:15Megan Horneman: We know what he has campaigned on.
- 2:17Megan Horneman: We do know one thing he does want to fix the economy.
- 2:22Megan Horneman: That's what he's talked about, but there is quite a bit to fix here from an economic standpoint, so we're not rushing in to jump into this rally in the equity market right now.
- 2:32Megan Horneman: What we're going to do is we're going to see how these economic data points continue to work themselves out and what policies he's going to put forward in the first few months that he's in office.
- 2:44Megan Horneman: But there, as I mentioned, there still is a lot that needs to be fixed.
- 2:47Megan Horneman: The consumer is still struggling.
- 2:49Megan Horneman: It's one of the reasons why he got elected because that was one of the focuses from consumers was inflation in the economy and then again inflation.
- 2:57Megan Horneman: This is a concern because not only would Trump be walking a fine line with spending or tax cuts, but, similar to the Federal Reserve, inflation is still sticky.
- 3:07Megan Horneman: We still have an inflation issue, so we have to be very careful that we don't reignite that by putting forth some big spending initiatives in the first year.
- 3:18Megan Horneman: Now, what we're seeing in the bond market is telling us just that that there is a fear here from an inflation standpoint.
- 3:23Megan Horneman: We've seen a pretty big sell-off in bonds, meaning yields have shot up significantly today because of this.
- 3:30Megan Horneman: We also saw this in 2016, because the view is that Trump's policies are inflationary and tariffs can be inflationary.
- 3:39Megan Horneman: But what does he end up actually doing?
- 3:41Megan Horneman: There's a lot that gets campaigned about.
- 3:43Megan Horneman: He end up actually doing.
- 3:47Megan Horneman: There's a lot that gets campaigned about.
- 3:48Megan Horneman: Sometimes he used these as almost bargaining mechanisms as well, so we're not sure exactly what will get done from a tariff standpoint, but the bond market's telling us be careful.
- 3:54Megan Horneman: It's inflationary.
- 3:55Megan Horneman: So again, it's something that could be troublesome for the Fed.
- 4:00Megan Horneman: And also Trump needs to watch from what he ends up getting through.
- 4:04Megan Horneman: Now let's talk a little bit about what it means to get control of the Fed, and also Trump needs to watch from what he ends up getting through.
- 4:06Megan Horneman: Now let's talk a little bit about what it means to get control of the Senate.
- 4:08Megan Horneman: So basically, getting control of the Senate means that the filibuster is going to stay.
- 4:12Megan Horneman: They do get to oversee the federal budget.
- 4:15Megan Horneman: We know that's going to be a big discussion early next year.
- 4:19Megan Horneman: The one thing that gives the power to the Republicans as well with holding the Senate is that the Senate has the ability to approve or reject the presidential appointees for different agencies.
- 4:29Megan Horneman: So President Trump, being that he has that Republican Senate, will be able to appoint those that he wants to without much objection, and we'll keep an eye on the House to see what happens there.
- 4:40Megan Horneman: But even with the Republicans winning that, it still will be a pretty small margin, so just keep that in mind as well.
- 4:47Megan Horneman: Now it's very early.
- 4:48Megan Horneman: We'll continue to update and offer insight.
- 4:52Megan Horneman: We'll look at our portfolios, see if there's adjustments that need to be made, but for today we're just going to focus on the fact that the market's rallying on, the first of all, the fact that this election was not close.
- 5:04Megan Horneman: This was, I think, a surprise.
- 5:06Megan Horneman: At how much it was.
- 5:08Megan Horneman: I guess you could say a landslide.
- 5:09Megan Horneman: This is something that the markets would have been more uneasy if it was.
- 5:12Megan Horneman: I guess you could say a landslide.
- 5:12Megan Horneman: This is something that the markets would have been more uneasy if it was.
- 5:14Megan Horneman: A tight election in this, drugged on for several days.
- 5:18Megan Horneman: So this was pretty much a landslide from the Republican Party.
- 5:22Megan Horneman: So I think that's another reason why the markets are rallying today, because any uncertainty is put behind us.
- 5:26Megan Horneman: We know what's ahead of us now.
- 5:29Megan Horneman: We'll be back tomorrow.
- 5:30Megan Horneman: We'll get the Federal Reserve meets tomorrow and they will set interest rate policy.
- 5:34Megan Horneman: They're widely expected to cut interest rates by 25 basis points.
- 5:37Megan Horneman: We think they still will.
- 5:39Megan Horneman: We don't think yesterday's election will have anything to do with that, but we'll be watching that statement closely.
- 5:44Megan Horneman: Will they be insinuating that, hey, we've gotten some good economic data lately.
- 5:49Megan Horneman: We've gotten a strong rally from the equity perspective.
- 5:52Megan Horneman: We've got a big backup in yields.
- 5:55Megan Horneman: What will they have to do going forward?
- 5:56Megan Horneman: Are they still on the path of having aggressive rate cuts through next year?
- 6:01Megan Horneman: That's all we have.
- 6:03Megan Horneman: If you like this podcast, please hit that subscribe button, hit the alarm bell, share it with friends, family or colleagues and, as always, if you'd like any of our past podcasts, you can go to marketswithmeganfm.
- 6:15Megan Horneman: Thank you.