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November 7, 2016 - ITS HERE... FINALLY.  NOW LET'S GET IT OVER!

| November 07, 2016

We’re in the middle of an interesting moment for the markets, where short-term volatility and uncertainty might lead you to believe that the economy is faltering. After all, the major stock indexes lost ground last week, with the S&P 500 losing 1.94%, the Dow dropping 1.50%, the NASDAQ dipping 2.77%, and the MSCI EAFE declining 1.59%. On top of these losses, the S&P 500 posted its longest losing streak since 1980.

Of course, we never like to see the markets go down. However, we believe that when you look beneath the surface, the economy is still doing far better than what this week’s performance implies. Behind the losses and ongoing election exhaustion, we see a number of strong indicators that the economy is growing. Last week, we learned that the trade deficit shrank, the service sector grew for the 81st consecutive month, and manufacturing continued its steady growth.
Our Takeaway
For years, this plow horse economy has been adding new jobs at a slow and steady pace. Now that we’ve almost reached the benchmark unemployment rate, people are finally starting to see their wages increase and new opportunities arise. Typically, better jobs mean more disposable income, which equals increased consumer spending—and economic growth.
The rest of 2016 might not be a smooth ride, as the election and potential interest rate increase remain on investors’ minds. We hope you find comfort knowing that beneath this short-term volatility, we see growing economic strength.

With the FBI more or less closing their email case on Clinton — again — the polls have shown a slight lift for Hillary.  The futures market then gapped up and as of this writing the S&P500 is up almost 2%.

It seems if the market had a vote it would like to see Hillary just squeak by, with very little change to the balance of power in the house and senate.  As I’ve said before, this is a vote to maintain course and speed.  The market has priced more of these variables in already.  A more extreme outcome — favoring either party — brings a lot more uncertainty to the outcomes.  That risk would then likely get priced in as a market decline in the short term.

So, Wednesday should be interesting.

This is our own version of the Brexit.  The question is, are the polls right or not?  Voter turnout is likely the deciding factor of this election.  We’ll just have to sort it out once the dust clears. Keep in mind the media never wastes a moment to instill fear into the public.  After all, good news doesn't get ratings.  The graphic below shows CNBC viewership tracked against the performance of the S&P 500.  Now, you tell me which they prefer... a higher market or a lower one?

Monday: Gallup U.S. Consumer Spending Measure, Consumer Credit
Tuesday: U.S. Presidential Election
Wednesday: Wholesale Trade, EIA Petroleum Status Report
Thursday: Treasury Budget
Friday: Banks Closed but Markets Open, Consumer Sentiment

Quote of the week:
“Worrying does not empty tomorrow of its troubles; it empties today of its strength.”
– Corrie ten Boom