Prior to the national elections, there was widespread expectation of a stock market debacle if Donald Trump became the President-Elect (Standard & Poor’s 500 Index futures plunged 5% as election night returns pointed to a Trump triumph). The rally in the S&P 500 Index since November 8 has thus been as big a shock as the election result itself. Banner headlines celebrating the stock market at or near all-time highs have created the impression that the stock advance is strong and comprehensive.
Not so.
Since November 8, the S&P 500 Index has risen a modest 2.4% and for the 4th quarter through December 2 the gain is a meager 1.1%. Further, a broader review of U.S. and international financial markets reveals that returns are actually negative for a diversified group of asset classes during both the post-election and quarter-to-date periods.
| S&P 500 Sector Performance | % since Nov. 8 | % QTD |
| Financials | 13.1 | 16.9 |
| Industrials | 7.4 | 7.0 |
| Energy | 7.1 | 5.1 |
| Materials | 5.5 | 4.3 |
| Consumer Discretion | 3.1 | 1.5 |
| Information Technology | -2.3 | -2.6 |
| Telecommunications | 4.3 | -4.3 |
| Utilities | -5.4 | -5.2 |
| Health Care | -0.1 | -5.4 |
| Consumer Staples | -4.4 | -5.4 |
| Real Estate | -2.8 | -9.1 |
| Source: Factset | Source: Factset |
S&P 500 industry sector data indicates how limited and narrow the U.S. market rally has been. The table indicates that the market advance since the election has extended to only 6 of the 11 industry sectors in the S&P 500. For the quarter-to-date, 6 industry sectors have suffered negative performance ranging from -2.6% to -9.1%. In the case of the Dow Jones Industrial Average, fully half of its November gains are attributed to just 3 stocks (CNBC). It is important to note that the election triggered a vicious rotation away from “Clinton beneficiaries” to the “Trump trade,” which caught a large number of investors on the wrong side.
| Performance Across Various Asset Classes | % since Nov. 8 | % QTD |
| S&P 500 Index | 2.4 | 1.1 |
| Nasdaq | 1.2 | -1.1 |
| Russell 1000 Growth | 0.6 | -1.3 |
| iShares MSCI All Country World ex‐U.S. ETF (ACWX) | -2.2 | -4.0 |
| iShares MSCI Developed International ETF (EFA) | -1.4 | -4.1 |
| iShares MSCI Emerging Markets ETF (EEM) | -6.3 | -6.2 |
| iShares Core Int'l Agg Bond ETF (IAGG) | -1.2 | -2.6 |
| iShares Investment Grade Corp. Bond ETF (LQD) | -3.1 | -4.8 |
| iShares Gold ETF (GLD) | -7.8 | -10.7 |
| Source: Factset |
The above data indicates that the post‐election and quarter‐to‐date periods have been significantly negative for international stock markets. Especially damaged have been emerging economy stock markets. For example, the Brazil ETF has returned ‐15.6% since the election and the Indian ETF has returned ‐7.4% quarter‐to‐date. Additionally, the 4th quarter is shaping up as very negative for U.S. and international bonds, and also for gold investments. The reality is that most broadly diversified investors are experiencing negative returns since September 30th and since November 8th.
We and other investors have made adjustments to our client portfolios to bring them into alignment with the new realities. We continue to believe, however, that global stock markets are reacting to heightened uncertainty arising from a new administration, and major shifts in investor preferences are possible in the near future. We thus continue to think that investors are best served by maintaining broad diversification by geography, industry sector, and investment style.