POST-ELECTION MARKET RESULTS Given the excitement and heady projections which dominated analysis of various investments leading up to the election, it is worth reviewing what the past two weeks have brought. Below are charts for stocks, bonds, and gold. After each chart is a short commentary…
STOCKS (S&P 500 Index SPX)Stocks rallied to new all-time highs immediately following the election and leveled off for several days with the S&P 500 breaking 6000 and the Nasdaq blowing through 19,000. Prior to the election, stocks had been rising since a brief reaction low in early August.The current uptrend, however, dates back more than two years and runs concurrent with expectations for lower interest rates. A sharp drop on Thursday and Friday is likely a reaction to remarks by Fed chair Powell that a series of aggressive rate cuts isn’t warranted or likely at this time.
BONDS (Treasury Long Bond ETF TLT)Bonds have not shown the optimism of stock investors. Sharp declines in bond prices followed the Fed’s announcement to lower their interest rate target after raising and keeping rates higher for the past 2 1/2 years. After rising briefly, bond prices dropped sharply immediately following the election, then rallied briefly before renewing their downside penchant last week. (see Fed Cuts Rates But Bond Rates Are Rising)
GOLD (Gold ETF GLD)Gold’s price has dropped consistently since Election Day. From an all-time high of $2786, gold has dropped more than $200 oz. to an intraday low of $2548 this past Friday.
SUMMARY AND CONCLUSION Two days after the election, I wrote the following:“Bond prices collapsed nearly 3% post-election and are down 12% since mid-September. Whatever that tells us did not change because of election results. The action in bonds is contradictory to the prevailing assumptions of a melt-up in asset prices because of expected lower interest rates, more cheap money and credit, and a collapse in the dollar. Speaking of the dollar, it was up almost 2% on foreign exchange markets since late Tuesday evening; and has gained 5% since early October. Finally, the price of gold fell sharply, and is down $100 oz. since Tuesday’s close.The action in bonds might not imply a credit collapse at this point, but it certainly doesn’t offer positive confirmation of higher stock prices, lower interest rates, and cheaper money and credit. The action in gold and the dollar is consistent with what is happening in the bond market. The price action in all three is contradictory to Fed attempts to lower interest rates. Keep your eye on the bond market and the U.S. dollar. – END OF POST-ELECTION COMMENTARYThe U.S. dollar remains strong on foreign exchange markets and with Powell’s note of caution regarding expectations for lower interest rates, downside action in all markets might be ahead for the remainder of the year.More By This Author:Throwing Gold BRICS At Broken Windows
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