Market Letter - October 2016
We are only twelve days away from a most contentious presidential election, and since mid-July, the market has gone “nowhere” trading in about a 600 point range (18600/18000). We believe the market will make a dramatic move based are who “takes the throne” on November 8th. If we have a Clinton win, the market will likely favor large, multi-national companies and financial companies like JP Morgan, Goldman Sachs and Bank of America. It has been evident over the past several months the Healthcare and Biotech sectors do not support a Clinton win. If we have a Trump win, the popular belief is the market will prefer the materials sector such as steel, sand, cement, all related to infrastructure and the Healthcare sector could rebound.
How does this affect you, the investor/plan participant? Remember: the market WILL always adjust to whatever political environment it needs to exist in and 401(k) participants are investing for the long term.
The major support in the market now is the 17960/17700 levels. If the 17700’ish number is violated, we could see much more downside. If you are risk adverse or have short timeframe to retirement, we suggest moving out of equities and into bond funds or cash if this happens. More importantly, contact our office for an individual review.
We here are busy analyzing many mutual funds; their core stock holdings and how they will react to whichever candidate wins. As soon as the election is over, we strongly urge you to contact our office for a complete review of the investments available to you.
Our viewpoint is that large cap value type mutual funds typically perform well in times of market uncertainty as these funds focus on companies with intrinsic value, meaning they will usually perform well in any market environment.
MARKET SECTORS
Gold had a nice move up early in the year and then again during mid-summer but has been dropping off since August.
Oil had a nice move up that began in August only to falter in middle September (down to $39 ish) and then up again holding around the $50 area. Still too soon to suggest a long term price.
After a severe drop late last year, Healthcare staged a nice move up off February lows but again began falling since August. We see the same activity with Biotechs.
Utilities have been sluggish most of this year with only a slight up-move.
Real Estate rebounded extremely nicely off its early year lows after a significant drop off late last year and has given back approx. 1/3 of this year’s gain but continues to look ready to move upward once again.
Stay “tuned” for more market insight and again, we firmly suggest you contact our office after the elections.