What Does a Post-Trump Market Mean for Investors?

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Portfolio Manager Charlie Dreifus on the market's enthusiastic response to Trump's election and what to watch for going forward.

An Unexpected Market Advance

The market's post-election advance was as unexpected as the results of the election itself. We wonder if the unexpected remain the dominant theme.

Some market implications seem clear to me. U.S.-centric small-cap is a desired, perhaps even preferred asset class now. Higher GDP and profits benefit equities.

However, if one accepts my argument that prior to the election the market was attractive only relative to the alternative—that is, the 10-year Treasury—then the market is vulnerable given its rapid advance last week. The "P/E" of the bond has dropped while the P/E of the market has risen.

The Dow had its best week since 2011 following the election and recently reached an all-time high.

Another takeaway is that the 'FANG' (Facebook, Amazon, Netflix, & Google) concept has been diminished because the premium for growth is perhaps not as valuable as it was in a slow-growth environment.

Among the factors needing reconciliation in the equity market are pro-growth policies and higher interest rates. We may not know the resolution of this for quite a while.

Right now, amid the uncertainty and inherent messiness of a new administration taking shape, we're also seeing shock from the Establishment's political players and an obviously angry, politically motivated demographic.

Looking For Signs Of A Pragmatic Approach

President-Elect Trump's selections for Cabinet and advisory positions will be important, if not critical. This could provide valuable insight as to whether we are headed into a Smoot-Hawley or Reaganomics kind of environment.

President-Elect Trump is, first and foremost, a showman who will try to garner the greatest impact from whatever he does.

Yet the country wants bipartisan cooperation. True, Congress has Republican majorities, but another unexpected and attention-grabbing positive could be Trump's seemingly bipartisan desires.

Much of the campaign rhetoric is empty and will need to be addressed. To take just one example, the notion of totally abandoning the NAFTA trade treaty. All U.S. car manufacturers produce cars in Mexico not only for the U.S. market, but also for export.

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