Research & Insights

November 2016

November 2016

Kai W. Hong, CFA
Managing Director & Chief Investment Strategist

After an especially divisive US presidential campaign, November 8 finally arrived and forecasters were once again proven wanting as Donald Trump shocked the establishment with his win. The initial market reaction was strongly negative as S&P futures fell over 800 points overnight and foreign markets were broadly negative. However, by the time the US markets opened the losses had been recovered. This set the stage for a strong rally in risk assets with Financial stocks being one of the top beneficiaries. Fixed income risk was meaningfully re-rated as the US 10Y yield jumped over 50 basis points during the month. US economic performance continued to improve with Q3 GDP revised up on buoyant household spending, and Fed governors signaled an increasing likelihood for a rate increase at their upcoming December meeting. Corporate results were generally good, but many firms moderated their future outlooks. Outside of the US, Brexit continued to be a slow-moving drama with the UK and EU both taking somewhat hardline stances in the media.

The Russell 3000 Index finished the month at +4.5%. At the sector level, Financials, Producer Durables, Materials, and Energy were leaders while Consumer Staples, Utilities, and Technology lagged. US small cap stocks rallied dramatically with the Russell 2000 Index returning +11.2%. Outside of the US, market performance was negative, partially driven by a strong dollar rally. The developed market MSCI World ex USA Index returned -1.6% while the developing market MSCI Emerging Markets Index returned -4.6%.