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March 29 2017

You’ve read it before – and it’s true. Markets hate uncertainty.

Failure to pass the American Healthcare Act, which was supported by Republican leaders in Congress and President Trump, may have spooked U.S. stock markets last week.

In an article titled, “How To Make Investing Decisions Based On Politics: Don’t,” Nasdaq.com reported controversy over the bill was “raising questions about [Republicans’] ability to focus on and pass policies that the market has been eagerly anticipating, such as tax reform and infrastructure spending.” Financial Times concurred:

“The post-election stock market rally has been largely powered by hopes Donald Trump’s administration would swiftly launch a bevy of aggressive economic stimulus measures, including tax cuts, deregulation, and infrastructure spending. However, Mr. Trump’s difficulty in Congress over the government’s healthcare plan has prompted some reappraisal by investors of the prospect of significant stimulus arriving later this year.”

Financial Times pointed out it’s likely other factors played a role in investors’ decision-making, as well. Some professionals have become concerned about market valuations. About 34 percent of fund managers believe global equity markets are overvalued and 81 percent say U.S. equities are the most expensive in the world, reported Fortune Magazine citing Bank of America Merrill Lynch’s survey of fund managers.

In addition, estimates for corporate earnings have been revised lower for the first quarter of 2017. Take that with a grain of salt, though. FactSet wrote, “In terms of estimate revisions for companies in the S&P 500, analysts have made smaller cuts than average to earnings estimates for Q1 2017 to date…”

Politics is one factor affecting markets, and partisanship may be affecting consumer sentiment. Richard Curtin, chief economist of University of Michigan Surveys of Consumers, said consumers’ expectations about future economic growth were split along party lines in March. “…among Democrats, the Expectations Index at 55.3 signaled that a deep recession was imminent, while among Republicans the Index at 122.4 indicated a new era of robust economic growth was ahead.”

We live in interesting times!

Sources:
http://www.nasdaq.com/article/how-to-make-investing-decisions-based-on-politics-dont-cm764637
https://www.ft.com/content/aa4efa32-0f37-11e7-b030-768954394623
http://fortune.com/2017/03/21/stock-market-value-bank-of-america-merrill-lynch/
https://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_032417.pdf
http://www.sca.isr.umich.edu

  • Data as of 3/24/20171-WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)-0.0140.0470.1510.0810.1060.05
  • Dow Jones Global ex-U.S.07.813.2-0.22.2-0.9
  • 10-year Treasury Note (Yield Only)2.4NA1.92.72.24.6
  • Gold (per ounce)1.57.6-0.3-1.6-5.86.5
  • Bloomberg Commodity Index-0.7-3.46.7-14-10.2-6.7
  • DJ Equity All REIT Total Return Index2.31.15.510.310.14.8

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of the bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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