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What a Long, Strange Trip It’s Been

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Has it ever.  Now that the Presidential Election is over many are left scratching their heads.    President Elect Donald Trump will be sworn in as the 45th President of the United States on January 20, 2017.  Very few pundits predicted this.  Then again very few pundits predicted Britain leaving the European Union (“EU”) this past summer.  This is known as Brexit.  Then again, very few folks predicted the Cubs would win the World Series for the first time in a hundred and eight years.  As Yogi Berra said, “It’s tough to make predictions, especially about the future.”

Putting the politics aside, let’s look at where we have been, where we are now and where we might be headed.

Where Have We Been

 

Ugly doesn’t even begin to describe the process the two candidates went through to get to the finish line.  The good news is that this is in the rear view mirror and we can move forward.

The economy has slowly come up off the mat from the Great Recession of 2008-2009.  The key term here of course is slowly.  This has been one of the slowest recoveries on record.  And that’s just the economic recovery.  For many the psychological recovery still continues.   For folks that lost jobs and their homes it was a very difficult time.  Regrettably some people didn’t have a Plan B.

Lehman Brothers became the poster child when it declared bankruptcy in September 2008.  It remains the largest bankruptcy in the U.S. at $691 billion.  That’s billion with a ‘B.’

Unemployment peaked at 10% in October of 2009. 1)  The stock market reached a low in March 2009.  All three of the major indices hit lows on March 9, 2009.  The Dow Jones Industrial Average (“Dow”) closed at 6,507.  2)

The government’s response to the Great Recession of 2008-2009 was twofold.  First they established a program called Quantitative Easing (“QE”).  This is a program where the Federal Reserve Board (“The Fed”) would buy Treasury Securities.  They ran four of these programs and bought tons of bonds.  The Fed’s balance sheet expanded from about $800 billion in 2008 to $4.5 trillion in 2014. 3)

Secondarily they cut interest rates.  They cut the Prime Interest Rate from 7.75% in 2007 to 3.25% in 2008.  4)  This was designed to encourage consumers and businesses to go out and spend.  Naturally when we look at too many numbers we need to be concerned with Lies, Damned Lies and Statistics.

Where Are We Now

 

The President Elect is now building his team.  Let’s hope he brings in some Rock Stars.  He’s going to need them.  I’m sure he realizes You Only Get a Mulligan in Golf.

Domestically the economy is in decent but not great shape.  The domestic economy has become The Little Engine That Could.  The unemployment rate has declined to 4.9% in October 2016. 1)  The stock market has rallied with the Dow closing at an all-time high of 18,869.  *

Where We Might Be Headed

 

Like predicting Brexit, The Presidential Election and the Cubs wining the World Series, predicting where we might be headed is difficult to do.  While many claims were made while he was running for office getting those implemented may be another story.  Even though his party ran the table and controls the White House, Senate and Congress that doesn’t necessarily mean they are all on the same page regarding economic policy.

He said he would build a wall between Mexico and the United States.  At one point he even had a plan for how Mexico would pay for this wall. I’m not so sure how this is going to work out. Presumably this wall was to prevent Mexicans from entering the U.S. illegally.  I don’t believe this wall would be put up to prevent U.S. Citizens from sneaking into Mexico at night!  Additionally he wanted to deport about 11 million undocumented immigrants living in the U.S.   So, if he is able to implement even some of these policies at the very least we will likely see less immigration.

Interest rates have been near zero for almost eight years.  As was mentioned above this was one way the Fed tried to stimulate the economy.  The Fed raised interest rates in December 2015 by .25% when the Fed Had “Liftoff.” Prior to this it had been almost a decade since interest rates were last rose.  The Fed will meet again in December 2016 and they are expected to raise interest rates by another .25%.  Although interest rates are still near zero, the trend appears to be up.  It’s clearly time for The Last Mortgage Refinance.

He has also proposed a very ambitious infrastructure plan.  He has proposed to spend a trillion dollars over the next ten years.  This would be to rebuild highways, airports, bridges and tunnels.  Supposedly this would add millions of jobs.  If it gets passed, perhaps it might. With this plan one would need to be very concerned about expanding the deficit.  If you want help to keep on Truckin’ please call me at (860) 645-1515 or email me at Thomas.scanlon@raymondjames.com.
1) Data.bls.gov
2) https://en.wikipedia.org
3) www.soverignman.com
4) www.jpmorganchase.com

• As of 11/14/2016

 

Any opinions are those of Thomas F. Scanlon and not necessarily those or RJFS or Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is  accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  The Dow Jones Industrial Average (DJIA) commonly known as “The Dow, is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal.  Keep in mind that individuals cannot invest directly in any index, and index performance does not include transactions costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.  Past performance does not guarantee future results.  Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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