Strong economy should trump post-election fear

As published in the Star Tribune 11/12/16.

After an exhausting election season, we now know the next president of the United States will be Donald Trump.

That reality scared some Americans enough to crash the Canadian Immigration website Tuesday night. The thought of President Trump brings genuine excitement to others. The divide among the American electorate is real and deep. We can mostly agree on two things, however:

1. We’re glad it’s over.

2. It’s impossible to know what will happen when a career businessman with no political experience is in the White House.

Despite the rally that sent the Dow Jones industrial average more than 250 points higher the day after the election, investors can expect big swings in the weeks to come. There are still more questions than answers about Trump’s economic policies and ability to govern.

That being said, it’s unlikely Trump’s influence on the stock market will ever be greater than it is now. With the election over, investors’ attention will refocus on the things that matter most to the market: economic data, corporate earnings, and central bank policies.

An unhealthy obsession with the presidential election and “what is wrong with America” has obscured the fact the U.S. economy remains stable and, dare we say, strong.

The economy added a respectable 192,000 jobs per month, on average, from July through September. Unemployment nationally remains below 5 percent, the lowest in more than four decades, and wage growth is beginning to accelerate. Consumer confidence reached its highest level since the end of the Great Recession.

Corporate earnings also show strength. As we approach the end of reporting season, more than 70 percent of companies in the S&P 500 announced quarterly earnings that beat consensus estimates.

Monetary policy from the Federal Reserve remains accommodative, and even though an increase in interest rates appears imminent, investors should interpret any rate hike as a vote of confidence in the U.S. economy. Since the start of the year, oil prices have stabilized and currency headwinds have abated.

Once the political drama wears off, it’s possible Trump’s stated priorities to increase infrastructure spending and lower corporate taxes could prove to be a positive for investors. Despite the negativity that has enveloped this race, the most significant drivers of stock prices signal better days ahead for the patient investor.

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