DOLLARS & SEN$E

HANLY NEWBY: CHRIS HANLY

INVESTMENT CONSULTANT, GARY GOLDBERG FINANCIAL SERVICES

The Trump rally is really history repeating itself.

While many are a bit surprised at the strong market rally since Mr. Trump won the Presidential election, we view this more as history repeating itself. There are valuable lessons to be learned for 2017 and beyond. Investors should understand and pay attention to patterns that, although uncertain, may provide some hints on what to expect.

First and most significantly, the fourth quarter of any given year is often the strongest performance quarter for stock markets. This particularly holds true in years that a new President is elected (please watch our webinar series for more detail on this – visit www.ggfs.com for details). Second, in contrast with conventional wisdom, markets also perform well during the early stages of Fed rate hike cycles. Here too history is on the investor’s side. Right now, it appears that the U.S. economy continues to gain strength and we are seeing early signs of wage inflation. These are very positive signs and are among the main reasons the Fed cites as grounds to continue to raise interest rates. In spite of this strengthening, it is important to remember that all economies are cyclical and that with each passing day our economy – just like any other – is one day closer to the next correction. This is both natural and healthy.

Looking ahead into 2017, the historical data becomes more mixed. Since the early 1950’s the stock market has risen only half of the time in post-presidential election years, but has risen seventy percent of the time overall. However, some of the greatest market gains have come during post-election years. In our view, which you can read about more fully in our newsletter, 2017 is likely to be one of the most volatile years for markets since the end of the 2008 / 2009 correction. The early part of the year is likely to see a continuation of the current cycle, in which small-cap and more growth oriented companies are outperforming their value brethren. None-the-less, investors would be wise not to abandon high-quality dividend paying stocks, as their strong balance sheets and steady dividends will likely be in favor during market downturns. Additionally, we believe that a more active tactical approach to portfolio management will be required. Looking beyond our shores for investment opportunities will be critical – this does not mean taking on additional risk. After all, companies like Nestle (Swiss), SAP (German) or Michelin (French) are global powerhouses that rival their U.S. counterparts.

I wish you a happy holiday season and a great new year, which I think will be both exciting and rewarding for alert investors.

Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at (845) 368-2907 or chris.hanly@garygoldberg.com.