In the Short Run, the Market Is a Voting Machine

by LPL Research

The election is finally over and to the surprise of many, equity prices rallied after the Trump victory. It was widely believed a Trump victory would bring with it increased uncertainty and a likely equity selloff. That wasn’t the case, as the S&P 500 gained a surprising 1.1% on the day after the election. The big question now is: could this early strength tell us anything about future returns?

Historically, the immediate reaction after the election has been to sell off. For instance, both of President Obama’s victories saw drops (with 2008 dropping 10% the next two days), but by the time the next election rolled around four years later, there were very solid returns for both of Obama’s terms. According to Ryan Detrick, Senior Market Strategist, “Although early market strength after the election is rare and caught many off guard this year, there is virtually no sign that it means much longer term, positive or negative. For longer-term returns, you need to remember to continue to focus on valuations and fundamentals.”

To borrow a quote the great value investor, Benjamin Graham, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Indices are unmanaged index and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC

Tracking # 1-554398 (Exp. 11/17)