Post-Election Markets- What’s Next?
By Frank Vance
As November drama concludes, much remains unchanged in financial markets. Equity markets continue to perform strongly, the bond market is finding its footing, and volatility has remained low. However, on the flip side, the political landscape is poised for significant change. In January, all three branches of government will transition to Republican control, marking a pivotal shift. While much political rhetoric is expected, it will be important to ignore the noise and focus on what matters…
Looking ahead, while many uncertainties remain, we anticipate meaningful legislation to emerge in 2025 with a unified Republican government. The slim majority in the House of Representatives may necessitate compromises, but we expect some form of tax reform to take shape by the first quarter of 2025. This timing is significant as the Trump-era tax cuts are set to expire at the end of 2026. Without intervention, this sunset would lead to higher tax brackets for most. We also expect potential codification of a long-term estate tax structure and more use of import tariffs as a government revenue tool and not just a trade normalization threat.
While the specifics of Republican tax legislation are uncertain, it’s clear that tax reform will be a key priority. Rest assured, as new policies are introduced, we will provide timely updates and insights on how they may impact you and your family.
Market Performance and Outlook
November was a robust month for markets. Equities rallied, driven by optimism surrounding potential reductions in corporate tax rates and regulatory reforms. In the fixed income space, interest rates outside of Federal Reserve control have moved higher, reflecting a more optimistic growth outlook. We have opined that a long-term treasury rate in the mid 4’s is our baseline with shorter duration in the 3’s.
As of today, the S&P 500 has gained 27% year-to-date, the tech-heavy Nasdaq 100 is up 30%, and small-cap stocks, which had a strong second half of the year, have risen over 20%. By all measures, 2023 has been an exceptional year for markets. Our neutral market stance and overweight position in small-cap stocks leading into the election have delivered positive results. We continue to maintain this position, and while raging bull markets are fun, they are normally not the time to get over your skis….
Looking ahead, we are maintaining a balanced approach. Following the strong market performance, many portfolios have naturally shifted toward a growth-oriented allocation. To address this, we anticipate that Q1 will be the time to conduct some rebalancing to ensure alignment with target allocations. While we remain optimistic, we continue to monitor inflation and interest rate dynamics closely.
As always, please feel free to reach out to us with any questions or concerns. We’re here to help you navigate these changes and opportunities.
Thanks,
Frank
Retirement Capital Advisors
800 Battery Ave SE
The Battery, Suite 100
Atlanta, GA 30339
Office- 412-722-3795
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
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