Schwab Market Perspective: Unprecedented! Or Maybe Not?
by Liz Ann Sonders, Senior Vice President, Chief Investment Strategist; Jeffrey Kleintop Senior Vice President and Chief Global Investment Strategist, Charles Schwab & Co, Inc.; Brad Sorensen, CFA, Director of Market and Sector Analysis, Schwab Center for Financial Research May 26, 2017
U.S. markets were roiled by so-called “unprecedented” political issues but bounced back quickly. Investing based on political winds is not likely to be a successful strategy and we urge focus on economic and earnings fundamentals.
The U.S. economy is bouncing back from the weak first quarter while the labor market continues to tighten. A June rate hike by the Federal Reserve remains on the table for now.
Global growth has picked up, but the recent slowdown and inversion of the yield curve in China are causing some concerns.
Politics invades the market
Political instability is in play these days with regard to the markets, but there are times when they move front-and-center. That occurred recently as impeachment of President Trump was brought up on the floor of the House of Representatives, and concerns spiked that the
business-friendly portion of the President’s agenda would fail to get enacted. Pundits and politicians are quick to pull out the “unprecedented” phrase to describe multiple actions by the current President and his staff. We aren’t here to debate the merits or wisdom of the actions in question; just to point out that investors shouldn’t get too caught up in the political wrangling’s with respect to investing decisions. It would not be unprecedented for Congress to criticize the president, or for the president to have missteps; although clearly impeachment is much less common. The institutions of U.S. government are not threatened, and, in fact, are working as the founders intended them, with the legislative and judicial branches providing checks and balances to the executive branch and vice versa. So we suggest keeping an eye, or maybe a squinted eye, on the political issues, because they can impact investment decisions at some point; but remain focused on your longer term goals and the more market-influencing fundamentals of economic and earnings growth.
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