Crestwood Perspectives: Trump’s Impact on Investment Markets

Yesterday’s unexpected election result causes investors to wonder what can be expected over the next few years from a Trump presidency and a divided country. This election has been highly emotional and personal, leaving many of us bleary-eyed and uncertain about the future. The high level of emotion in this election is reflected in global stock markets, which initially sold off on Wednesday following Trump’s victory only to recover strongly as the day progressed. At Crestwood we know that emotions and investing don’t mix well. We try to look past the rhetoric to analyze potential long term outcomes of the election.

Uncertainty

Markets don’t like uncertainty and global stock markets initially sold off in reaction to Trump’s surprise victory. Adding to investors’ unease has been Trump’s avalanche of eye-popping rhetoric throughout the campaign. Trump wants to fire Janet Yellen, Chair of the Board of Governors of the Federal Reserve, tear up the North American Free Trade Agreement (NAFTA) and even suggested renegotiating the U.S. debt obligations. These comments are a small sample of his suggested changes that concern investors. With all of these comments long on rhetoric and short on details we are left speculating, for the moment, on how a Trump presidency will affect the markets. Continue reading

Investing Through Recessions

The U.S. economy has now grown for 69 straight months, making this the sixth-longest period of economic expansion since the 1850s. The stock market has climbed apace—albeit with plenty of volatility along the way.

Still, the law of gravity hasn’t been repealed. Economic growth and contraction have always alternated, and at some point we’ll experience a recession. That, of course, will impact stocks.

Recessions’ Toll on Stocks 

Recessions are defined as periods in which Gross Domestic Product—a measure of trade and industrial activity—shrinks for two successive quarters. Slowing economic activity typically coincides with lower corporate sales, earnings and profit margins, higher unemployment, as well as higher levels of bankruptcy. Typically, equity indexes will fall in advance of and during a recession. Often a bear market, a period when stock prices drop by at least 20%, and a recession, will overlap one another. Continue reading