stock market performance
The common assumption is that lower tax rates should increase corporate profits, share prices, investment, and consumption, and thus lift the entire economy. Unfortunately, this is not quite how it happens in the real world.
How high can US equity markets go? For a sense of the S&P 500's direction, we conducted an informal poll of readers of CFA Institute Financial NewsBrief for their perspective on where they see the index a year from now.
Despite the euphoria in the Hillary Clinton and Donald Trump camps, there remains a great deal of uncertainty about the outcome of this election and what it will mean for the United States and the country's standing on the world stage. This uncertainty extends to the effect of US elections on stock prices, judging by the voluminous and often contradictory research on the topic.
Investors should fear missing out on the best gains more than suffering the worst losses, says Michael Batnick, CFA. If you never attempt to avoid the worst weeks, you’ll never have to worry about missing the best weeks.
Despite Wall Street expectations that the S&P 500 would rise 8% in 2016, the index fell 7% in December and January. Five points of that decline came in January alone. But January’s slide was only just greater than one standard deviation move. As we’ll see, one month can handily destroy expectations going forward.
In a recent speech, Federal Reserve Bank of Dallas president Richard Fisher aptly remarked, “Stock market metrics such as price to projected forward earnings, price-to-sales ratios and market capitalization as a percentage of GDP are at eye-popping levels not seen since the dot-com boom of the late 1990s.”
As most global stock markets have been on a tear of late, we thought it would be timely to ask readers what posed the greatest threat to equity markets. Over 37% of the 974 respondents to this poll believe that a global economic slowdown is the greatest risk to stocks.
Here's a quick summary of some of the most recent research on how presidential politics impacts equities.