Following the 2016 Presidential Election, the stock market (S&P 500 Index) has experienced a large rally. This rally in stocks is due in large to anticipation of two major campaign promises being fulfilled – healthcare reform and tax reform. Neither have happened.
Eight months ago, investors were thinking; If healthcare reform and tax reform happens, economic growth in this country will increase. Economic growth will then cause inflation to
increase due to job growth, wage growth and increased spending. Increased inflation would prompt the Federal Reserve to raise interest rates at a faster pace which will have a negative
impact on bonds.
Things have not happened quite as investors had planned. Healthcare reform and tax reform have lost momentum as political leaders fail to agree in finding any common ground. The debates have virtually stopped for the summer.
The economy has shown some growth and the S&P 500 Index is now at high valuations. Some financial experts feel the S&P 500 Index it over priced. Inflation has not increased as anticipated; consequently, the Federal Reserve seems to be softening their position about raising interest rates as fast as previously expected. In addition, bonds have held up better than
Things don’t always happen as planned and investors should have an investment strategy that can absorb the ebbs and flows of the changing financial landscape to keep them on track to reach their financial goals.