The long-awaited November election results surprised the world.

Republicans held majorities in the House and Senate and unexpectedly won the Presidency.

Mr. Trump's odds were 4-1 in betting pools on election day and soared to 12-1 early that evening.

The DJIA dropped 800 plus points in the overnight futures markets on Nov 8, but began to rally the next morning. Despite dire warnings by many, the DJIA rallied 5.8 % for the month. 

The SPX closed at record highs, up 7.58 % year to date and up 3.4% in November alone.

The shocking result caused a massive migration from bonds into stocks causing the third worse selloff in 30 years for US Treasuries.

November was the worst month ever for the Bloomberg Barclays Aggregate Total Return Index with a 4 % loss. 

Sentiment swiftly changed from low interest rates forever to faster GDP growth, higher rates are here to stay and inflation is coming soon.

More money was lost in bond markets than was made in stock markets.

Trump's policy proposals, previously ignored by the media, focus on reduced tax rates for corporations and individuals. He proposed a $1 trillion spending plan to modernize our infrastructure.

Repeal and replacing Obamacare takes pressure off small business and will aid job creation as employers no longer fear new full time hires costing them too much. 

With lower regulatory burdens anticipated on banks and manufacturing we saw an industrial and finance stock run heretofore absent for years.

Defensive stocks, even with good yields swooned, along with foreign stocks due to U.S. dollar strength.

Gold and municipal bonds plunged as safe havens were suddenly out of fashion. 

Growth stocks took a back seat to small cap value stocks and cyclical sectors.

This is what a bond yield tantrum, like 2013 looks like on the chart below.   

In summary, a sea change in markets and perception for growth prospects has occurred with the election results.

Bonds are no longer as safe a haven as they once were. Rates look like they bottomed in July 2016 at 1.33 % on ten year UST’s.

Hopes for a stronger for longer economy have improved given this business-friendly administration.

We are more bullish on stocks looking ahead and more concerned about long dated bonds.

Risk is back on for emboldened investors but it won 't be a straight line to higher prices.

The business cycle has not been repealed. We have not had an economic downturn in 8 years. Our national debt has doubled under President Obama. President Trump's new spending must be financed with more deficits. 

We are adjusting portfolios to reflect new realities.

All the best for a wonderful holiday season!

 Doug Coppola

John Coppola

December 1, 2016 

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