After a lengthy campaign marked by negativity and divisiveness on both sides, Donald Trump was elected the 45th President of the United States. While it may be natural to devote this piece to a discussion about the potential implications of a Trump presidency on the economy and financial markets, we would like to instead focus on something different. After all, it is nearly Thanksgiving — a time to reflect on the blessings in our lives and for what we are most thankful. Along those lines, what can we all be thankful for this past year from a financial perspective?
- A growing economy. The US economy continues to expand. The initial estimate for third quarter GDP growth is 2.9% which would mark twenty-seven of the last twenty-nine quarters with positive economic growth.
- Steadily improving earnings. After a rough 2015, corporate earnings have steadily improved throughout 2016 due to lower oil prices and a more stable US dollar.
- Falling gas prices. Having just paid $2.09 per gallon to fill up the car, it is easy to forget that not all that long ago, oil was more than $100 per barrel and gas was more than $4 per gallon.
- Low inflation. Remember when some predicted we would face hyperinflation due to all that Federal Reserve quantitative easing? Well, inflation is still hovering around 2% — well below its long-term average of 3%.
- Continued low interest rates. It was about this time last year that the Fed raised rates for the first time in a decade. At that point, the anticipation was that the Fed would continue to raise rates throughout 2016. With just a few weeks to go in the year, we are still awaiting another rate hike. While we may get an increase in December, this will go down as another year in which the markets enjoyed extraordinarily low (and at times falling) interest rates.
- A much better than expected bond market. Nobody predicted bonds to perform as well as they have in 2016. Heading into the year, bonds were supposed to face tough sledding considering the Fed was expected to raise rates several times during the year. In reality, just about every area of the bond market has defied expectations despite incredibly low and in some cases, negative short-term interest rates around the world.
- An incredibly resilient stock market. Given how well stocks have done 2016, it is easy to forget how abysmally the year began. The first six weeks of the year marked the worst start to a calendar year in the history of the stock market. Even though stocks rebounded just as quickly thereafter, the markets weathered Brexit, uncertain Fed policy, and a contentious presidential election, hitting new highs throughout the year and keeping the seven year plus bull market going.
- The Cubs won the World Series for the first time in 108 years! Okay – not a financial event (unless you were prescient enough to bet on the Cubs before the year began) but still an amazing occurrence nonetheless. And for all those life-long suffering Cubs fan, certainly an excellent reason to be thankful for 2016!
A very Happy Thanksgiving to you and your family!