Q4 Review: Trump, Taxes and Ticker Gains

in Market Commentary by

If there’s one thing we learned in Q4 of 2016, it’s to expect the unexpected. November ushered in a new president, one whom very few expected. The market reacted to this surprise in a way that was also unpredicted, with U.S. stocks responding favorably. And lastly, as we forge ahead in the new year, we’re entering a time of uncertainty when it comes to capital markets.

Many investors are currently drawn toward U.S. stocks, thanks to the unexpected rally in November and the eighth year of a bull market. With the new administration, we are facing new regulations and tax changes. It remains difficult as usual to predict anything with certainty; this doesn’t necessarily mean anything bad – it just means that there will likely be bigger moves in either direction. The first year of a president’s term has historically been the most volatile part of the presidential cycle. But as always, it is important to remember that stocks go up more than they go down.

The good news is, we don’t need to fear the unknown, as long as we prepare for it. We think that at the end of the day, the best way to expect the unexpected is a diversified approach to prep you for whatever may happen in the new year and beyond.

In this report, we’ll discuss the potential market implications in the first year of a Trump presidency.

Key insights from this Q4 review include:

  • The potential for tax reform as early proposals from Trump and the House GOP suggest meaningful tax cuts for the highest earners and a modest change for most other taxpayers.
  • There is a greater fear surrounding bonds, which we think is excessive. The appropriate mix of bonds should continue to provide portfolio stability.
  • Personal Capital managed portfolios performed well. Returns for both the quarter and year compared favorably relative to similar blended benchmarks of traditional indexes.

That’s not all that happened this quarter. To learn more, check out our newly released Fourth Quarter, 2016 Market Review and Outlook.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.