The Markets Since the Election
Last week marked the first year since the presidential election, so let’s look at what markets have done since Election Day.
Of course, you know that U.S. stock indexes are sharply higher than a year ago. The major indexes each returned more than 20%, but the increase isn’t across the board for all indices.
The Nasdaq 100 led the way with a 32.54% increase, while the Dow Jones Industrial Average was just behind it at 30.77%. The S&P 500 was well behind with a 22.98% increase, which would be outstanding in almost any other year.
The S&P Mid-Cap 400 trailed the large company indexes, returning 22.48%. However, the two major small company stock indexes beat the S&P 500. The S&P SmallCap 600 returned 24.67%, while the Russell 2000 returned 25.01%.
Additionally, growth stocks beat value stocks, whether we look at large companies, mid-size companies, or smaller companies.
For example, the S&P 500 Growth index returned 26.60%, compared to 18.02% for the S&P 500 Value index. In mid-cap stocks, growth beat value by 24.49% to 19.36%. The margin was less among small companies, with growth returning 25.67% compared to value’s 23.07% rise.
Within the S&P 500 sectors, only telecommunications lost value by dropping 5.14%. Laggards that notched small gains included energy, up 3.66%, and consumer staples, rising 5.78%.
The leading sectors by wide margins were technology, which rocketed 36.08%, and financials, soaring 32.59%. The other sectors returned between 16% and 25%.
International stocks also have done well since the U.S. election last November.
The emerging markets index returned 25.54%, while the developed markets index, EAFE, gained 23.70%. Among major countries, Italy led the way with a 41.71% return. France and Germany were the closest competitors with gains just over 30%. The laggards were Mexico, which dropped 4.28%, and Brazil, which returned 5.63%.
Other assets didn’t fare as well as stocks. A broad-based commodities index returned 11.26%, but there was a lot of dispersion within commodities. Oil gained 13.07%, while natural gas lost 5.71%. Gold declined 0.42% while silver lost 8.33%.
U.S. bonds had a very rough time after the election as interest rates rose. Bonds, however, recovered a lot of their losses as the year went on. Long-term treasuries couldn’t make up all of the initial decline, losing 2.14% for the year following the election. Intermediate treasury bonds lost 1.74%. Most other bond categories had gains of less than 1%.
Many factors contribute to changes in the markets and economy, but the consequences of the presidential election were a major factor. The new administration changed the regulatory climate, and there’s a strong effort to change the tax code. The Fed also managed monetary policy well over the last year. These factors have, so far, overridden any potentially negative consequences of the Trump administration’s new trade policy and its other policy changes.
The Data
Producer Prices had another solid rise, increasing 0.4% after climbing the same amount last month. The core price index, excluding food and energy, also rose 0.4%. That puts the 12-month increase at 2.8% for the main index and 2.4% for the core index.
The Consumer Price Index climbed, but not as much. Prices rose 0.1% compared to 0.5% last month, but, excluding food and energy, prices jumped 0.2% compared to 0.1% last month. The 12-month increases are 2% for the headline number and 1.8% when food and energy are excluded.
Consumer Sentiment, as measured by the University of Michigan, declined a little to 97.8 from 100.7, but that still is a very high level. Respondents to the survey expressed concern about rising inflation and interest rates.
Small business owners, on the other hand, were a little more optimistic. The Small Business Optimism Index from the NFIB rose to 103.8 from 103.0. The biggest concern of business owners is earnings, though the owners are optimistic about the economy in general.
Retail sales increased 0.2%. That follows a revised 1.9% increase last month, but much of last month’s increase was caused by people buying replacement autos after the summer’s hurricanes. Excluding autos, sales rose only 0.1%. However, excluding both autos and gas, sales rose 0.3%.
Manufacturing in the New York area still is strong but slowed from the red-hot levels of the last two months, according to the Empire State Manufacturing Survey. The measure came in at 19.4, compared to 30.2 last month. It is the lowest level in four months, but still the fourth-highest reading since September 2014.
The Philadelphia Fed Business Outlook Survey was similar. It came in at 22.7, which was down from last month’s 27.9, but still indicates very strong growth. Employment is down, despite the strong growth, which indicates employers can’t find qualified workers for job openings.
The hard data continues to reflect the strength in the surveys. Industrial Production rose 0.9%, and last month’s growth was revised higher to 0.4%. The manufacturing component increased 1.3%, and last month’s number was revised higher to 0.4%. There are some distortions due to the summer hurricanes. Motor vehicle production was a large part of the increases, and much of that is due to people replacing vehicles destroyed by the hurricanes. Even after factoring that out, manufacturing appears to be improving at a steady pace.
Home builders are feeling optimistic again. The Housing Market Index from the NAHB rose to 70 from 68. That’s the highest level since March. This is another survey that’s been very positive during the year, but the hard data hasn’t been as positive as the surveys.
New unemployment claims increased by 10,000 for the second consecutive week. Some of that was due to increased claims in Puerto Rico. Despite the increases, new claims are near historic lows.
The Markets
The S&P 500 had another negative week, losing 1.03% for the week ended with Wednesday’s close. The Dow Jones Industrial Average declined 1.06%. The Russell 2000 fell 1.07%. The All-Country World Index declined 1.48%. Emerging market equities slid 2.44%.
Long-term treasuries rose 0.16% for the week. Investment-grade bonds lost 0.37%. Treasury Inflation-Protected Securities (TIPS) fell 0.06%. High-yield bonds dropped 0.77%.
The dollar tumbled 1.14%.
Energy-based commodities fell 2.02% for the week. Broader-based commodities also lost 2.02%. Gold declined 0.24%.
Bob’s News & Updates
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