Yesterday was the first anniversary of Donald Trump's election as US president, and I know many people who wanted to see the economy fail and the complete demise of America in the wake of that news. For those of you who still hope for that, personally, I view that as unfortunate. I'm an optimistic person by nature, and I want the best for the America that I love. I've also learned, in my very limited time on this earth, that some very surprising results can come from unprecedented situations.
For those of you who bet against Trump with your money and went to cash, you've missed out on 21 percent gains in the S&P 500, 28 percent in the Dow, and 30 percent in the Nasdaq. What drove these gains was an economy that was in the process of getting better long before Trump was elected (despite his claims, I won't give him full credit). But, gross domestic product (GDP) growth continues to improve, and unemployment fell to 4.1 percent in October, the lowest rate in 17 years
. The repeal of Dodd-Frank has helped many companies in their day-to-day business and regulatory operations.
In addition, and this has not reported much by the general media, our elected officials did pass a (semi) balanced budget - without waiting until the 11th hour - for the first time in years. In the meantime, we're also preparing for more news on additional tax reforms, as well as potential transportation "make America great again" building projects, that could put additional money to work within the American economy.
We're also rebuilding Houston and parts of southern Florida, where an estimated 500,000 cars will have to be replaced due to the hurricanes. As we know, when people buy new cars, whether because of a hurricane or because "old reliable" finally gave up the ghost, they also often buy or build new homes. So, this should also support residential real estate across the country.
From a lending perspective, it's also becoming easier to acquire credit, which, yes, will eventually lead to boom/bust, but I don't think we'll see that for another three to five years. And, speaking of low interest rates, despite my opinion, the general consensus seems to be that we'll see another rate hike in December, which then leads the experts to predict only one rate hike from the Fed in 2018. We shouldn't be seeing runaway interest rates, which should in turn create a headwind for the home and auto industries.
We'll also have a new Federal Reserve chair appointed within the next 60 days. The current nominee, Jerome "Jay" Powell, is a pro-business lawyer who once worked for the Treasury Department and was nominated for the Federal Reserve Board of Governors in 2011. That's a good thing, as that only helps small businesses deal with regulatory changes - and trust me, I speak from experience.
Another area we're also continuing to monitor is the the price of oil, as it appears Saudi Arabia is scaling back production in an attempt to send prices higher over time, which will maximize the value of Aramco, the largest oil company in the world. It's expected to have a market capital of $2 trillion - roughly twice that of a little company called Apple. We anticipate that they want to maximize their value when they IPO in 2018
Now, I'm not going to use the word "collusion" here. But, many US oil producers aren't selling futures anymore, but are instead letting it float, which, 1) doesn't put pressure on the price, 2) if oil continues to go up, will mean significant increases, and 3), now that oil is around $57 per barrel, US producers are back in the mode of playing the "let's see how high we can go with Saudi Arabia" game, instead of selling futures at $50 per barrel and ensuring business for their companies in the years to come. The point here is, we're keeping a close eye on energy prices right now, because as they rise, that could mean increased inflation, which I believe we'll see primarily in food prices at groceries stores and restaurants.
One question I'm getting a lot right now (and no one will admit they did this, so everyone is asking "for a friend"), is how to rectify the fact that they moved a lot of money to the sidelines, as they were sure Trump signaled the end of the world. These folks made investment decisions based on their political views, and those should not go hand-in-hand. Some of you held onto more cash because, even though your party's candidate got elected, you had that "holy crap - this guy has access to the nuclear codes!" moment. Not that I'm not concerned, but, we still believe you can build your portfolio with decent priced stocks, bonds and alternative investments that will work for you over both the short and long term.
At the same time, I do believe that who you have managing your money and watching over your hard-earned assets is much more important than any strategy pitched to you. I say this because, our premise is that you invest your money so that one day, you can use it for the needs of you and your family. With this understanding, our objective is to not just invest, but to proactively monitor how it's doing for you, regardless of the current political or economic environment we find ourselves in. And I know for a fact that while many people say they'll do this, few investment teams actually do monitor your money as closely as we do. Some take a "set it and forget it" approach. At Family Financial Partners, we know exactly what you own, and will educate you to understand as much as you want to about why you own it. It's part of what makes our team who we are.
If you're one who is still on the sideline, or you haven't had a professional look at your portfolio in some time, or maybe you just have some cash you haven't touched for a year, come talk to us. We've got some ideas to kick around.