Stock Markets Spike on Election Results; Bonds Rally

Good morning and Happy Veteran’s Day.  For those of you who served, thank you for your service to the best country in the world.  Much appreciated!

The Dow (+4.6%), NASDAQ (+5.7%), and S&P 500 (+4.7%) all showed strong gains last week.  Meanwhile, taxable bonds gained about 0.8% and tax-free municipal bonds gained about 0.5%.  The 10-year Treasury yield fell 0.07% to finish the week at 4.30%.

The US elections were last week, and while all the results aren’t final yet, it appears that the Republicans have swept the Presidency, Senate, and House of Representatives.  After the election results were reported, the stock market jumped over 3% on Wednesday in a broad rally.  The main drivers of the stock market rally were associated with an anticipated decrease in regulations that could thwart economic growth, an expected surge in domestic energy production, and potential relief in corporate tax rates.  In addition, many pundits believe that a Republican sweep could result in an extension of the tax cuts set to expire at the end of 2025, but that requires Congressional approval.  The financial, energy, and industrial sectors of the markets rallied the most, as shown by the chart below.

The Fed also had their policy meeting on Thursday, but that was masked by the election headlines.  As expected, the Fed cut rates by 0.25% at its latest meeting, and indicated that it continues to believe that inflation is moderating even in the backdrop of solid economic growth.  The Fed also implied that it could return interest rates to a more neutral level and that it can be done gradually.  Of course, that is in the absence of a significant move in either direction of inflation or the jobs market.  This week, the most recognized inflation gauge – Consumer Price Index (CPI) – and the retail sales report from October will be released.  These are two important gauges of the economy that are looked at closely by the Fed.

Last Thursday, Menninger & Associates held a “town hall” meeting with Thomas Balis, CFA, founder of Cornerstone Portfolio Research.  That ended up being almost an hour, in which Mr. Balis discussed the Impacts of the Election on the Economy.  That town hall was taped, and the video was sent out on Saturday morning, but a link is also included below.  Have a great day and terrific week!

Menninger & Associates Town Hall

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