Financial Industry Insights from Advisors Asset Management

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AAM Viewpoints – The Markets are Beginning to Refocus…

For a majority of 2016, a large portion of the population was focused on the elections and since the elections we have all been captivated by the results and consumed with Twitter comments, confirmations, protests, demonstrations and boycotts. However, now the inauguration is complete and Donald Trump has been sworn in as the 45th President of the Unites States. We think (hope?) this will allow us to return to more of a “business as usual” mindset as we don’t think change will comes quite as fast as promised or feared, depending on which side you may fall. The good news is we believe the capital markets have already begun to return to business as usual and refocus on the real drivers.

Since hitting another all-time high on December 13, 2016 that allowed the S&P 500 to tack on a 6.18% gain after the election (11/8/2016 – 12/13/2016) the index has essentially treaded water for the last five weeks. The Dow Jones Industrials has done the same hovering just below the 20,000 level over this period. We’ve all heard of “Buy on the rumor, sell on the news.” Perhaps for now we have a case of “Buy on the rumor, wait on the news.” As we wait on the news of how President Trump’s agenda will potentially pave a new road for America we would just like to remind investors that most roads (at least here in Chicagoland) have some potholes.

There has been some rhetoric that the Obama to Trump transition has parallels to the Carter to Reagan transition. Time will dictate whether or not this is true, but in the meantime we would like to remind investors that after President Reagan was elected the S&P 500 tacked on 5.44% as it ran to a near-term high on 12/31/1976. The new administration was then greeted with a 14-month selloff that saw the S&P 500 shed 19.13%. To be clear, the U.S. economy was in a much different state then and we aren’t suggesting we will see that type of selloff this time. However, we definitely think a pullback or correction is possible as 2017 unfolds. Regardless, we do believe the bull market in equites will continue but the drivers in the short term will most likely be the current, solid state of the U.S. economy and corporate earnings.

In the first three weeks of 2017 we have seen many economic reports that continue to detail a strong and strengthening U.S. economy. These include ISM Manufacturing and Non-Manufacturing, Vehicle Sales, Housing Starts and Continuing Jobless Claims. Switching to earnings we are still early in the reporting cycle, but with about 9% of the S&P 500 companies complete it looks like the momentum that began mid-year in 2016 is intact. Compared to last quarter, which turned out to be the best quarter for earnings since the 4th quarter of 2014, earnings growth is accelerating but – as mentioned – we are still early in the cycle so we will continue to monitor the reports closely. In the meantime we would continue to recommend investors stay optimistic, patient and diversified as the new administration takes the reins.

CRN: 2017-0117-5743 R

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit



Effective, June 10, 2016, please note that Gene Peroni left Advisors Asset Management (AAM) to become President of Peroni Portfolio Advisors, Inc. Peroni Portfolio Advisors, Inc. ("PPA") is an investment advisor independent of AAM.