2024 Post-Election Market Takeaways: What They Mean for Your Retirement and Investment Planning
In this month’s newsletter, our feature article explores the traditions of Thanksgiving, highlighting how the Pilgrims embraced free-market principles to build a prosperous colony. Interestingly, in the wake of the recent election, we’re seeing a similar focus on markets and economic policies. As the dust settles from the 2024 election, it’s a good time to reflect on the initial market reaction and how investors are interpreting the results.
Déjà Vu in the Markets? Comparing 2024 to 2016
The election outcome was notable for a historical reason: the president-elect, Donald Trump, is making a rare political comeback after a previous election loss—a feat not seen since Grover Cleveland in 1892. With Republicans set to control the White House, Senate, and House, investors are looking back to Trump’s first term as a potential roadmap for market behavior. But is this a case of history repeating itself, or have the economic fundamentals changed too much for a direct comparison?
Early Market Trends: A Familiar Pattern
The initial market reaction has mirrored trends from Trump’s first term, with bank stocks rising on expectations of deregulation and small-cap stocks benefiting from anticipated tax cuts and protectionist trade policies. Conversely, international stocks have declined, reflecting concerns about tariffs and potential disruptions to global trade. Renewable energy stocks have also dipped, with investors anticipating a rollback of clean energy policies and subsidies.
In the bond market, we’re seeing Treasury yields rise amid concerns that tax cuts could maintain or increase the federal deficit. It’s as if the market is in “copy-paste” mode, relying heavily on its memory of the previous Trump administration’s policies to guide investment decisions.
A New Economy, a Different Market
While the market’s initial reaction is understandable, it’s important to recognize that the economic landscape has evolved significantly since 2016. Back then, the U.S. economy was emerging from an industrial slowdown, with weak manufacturing growth and sluggish consumer spending. In contrast, today’s economy is marked by robust growth, low unemployment, strong consumer spending, and a larger federal deficit. The Federal Reserve is currently cutting interest rates rather than raising them, and the lingering effects of the pandemic have reshaped both the domestic and global economy.
In the equity market, we’ve also seen a stark difference in performance: the S&P 500 returned +36% in the 12 months leading up to the 2024 election, compared to only +2% before the 2016 election. Stock valuations are higher, interest rates have increased, and credit spreads are tighter, painting a picture of a much more complex and dynamic investment environment.
Trump 2.0 Doesn’t Mean Markets 2.0
Investors hoping to use Trump’s first term as a straightforward guide may need to reconsider. While the policies may appear similar, the underlying economic conditions are quite different. This is a critical reminder that investing isn’t as simple as following a script—market fundamentals and economic data will continue to be the primary drivers of performance.
As we reflect on Thanksgiving’s themes of gratitude and growth, it’s worth remembering that a healthy economy, like a successful harvest, requires careful planning, adaptation, and sometimes a willingness to change course. Just as the Pilgrims adapted their approach to ensure a prosperous colony, investors must remain vigilant and flexible, focusing on the evolving data rather than clinging to historical playbooks.
Visual Insight: A Closer Look at Market Trends
To give you a visual snapshot of the market’s early reaction, we’ve included our Chart of the Month, comparing key indicators from 2024 with those from 2016. While certain trends seem familiar, the underlying differences highlight why flexibility and informed decision-making are more crucial than ever.
Key Takeaway
The markets may be tempted to replay the script from Trump’s first term, but the economic environment today is far from identical. Investors should be cautious about relying on past patterns and instead focus on the fundamentals driving current market behavior. Trump 2.0 might bring familiar policies, but that doesn’t mean we’ll see a carbon copy of the past market performance.
Looking Ahead: What Should Investors Do Now?
The year’s almost over, and while we’re all busy making room for holiday leftovers, it’s also the perfect time to take stock of your personal financial planning strategy. Remember, markets and turkeys have one thing in common: they can both surprise you when you least expect it. With the recent election shifts and economic changes, now is the moment to review your plan and make sure it’s set for a strong start in 2025.
Before you get caught up in the end-of-year whirlwind, we encourage you to book a year-end check-in with Julie. Whether you need to fine-tune your tax strategies, review Required Minimum Distributions (RMDs), or make sure your financial ducks (or reindeer) are in a row, Julie’s got you covered. Let’s wrap up 2024 with confidence and hit the ground running in the new year.
Ready to get started? Schedule your meeting here: Schedule with Julie.
The information and opinions provided herein are provided as general market commentary only and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
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