Stock market rallies and declines are usually precipitated by a dramatic change in outlook for future profits. Before November 8, Wall Street seemed comfortable with the status quo represented by the anticipated election of Hillary Clinton. On election night, the Dow futures plunged 800 points when Donald Trump’s upset became apparent. The consensus was that the stock market would drop dramatically in the event of a Trump victory. However, it did not take long for the stock market to rapidly adjust to the reality of a Trump administration and economic policies, which were in some cases quite different from either party.
The post-election rally has been driven by a number of assessments (lower taxes, infrastructure spending and deregulation) on the economic front that was broadly interpreted as positive. This bellwether election represents the first time since Dwight Eisenhower was elected in 1952 that a Republican president will enter office with GOP majorities in both the House and the Senate.
We feel there is greater value in focusing on individual companies and their economic merit as opposed to macro factors such as monetary and or fiscal policy, which are constantly in flux and give the stock market its overall random nature.