“Trump Effect” Pushed Capital Markets Higher, but Will It Last…

By the Chartwell Capital Markets Team

MINNEAPOLIS – June 20, 2017 – Since our last commentary, the market has experienced robust performance due in part to what many have titled the “Trump Effect” or “Trump Trade.”  Post-election, equity markets soared to all-time highs, with the S&P and Dow indices each up 20% since Election Day.  Investors experienced exuberance following the election as President Trump promised heavy tax cuts, deregulation, a protectionist trade policy, and fiscal stimulus.  The market viewed this as a major policy shift from monetary easing to fiscal expansion, reminding many of Ronald Reagan’s presidency.  Further, lenders expect reduced regulatory pressure (perhaps a reversal of highly leveraged transaction lending requirements) will free up capital for more aggressive lending.  As investors have used the presidential transition to position themselves for a higher growth, higher interest rate environment, fixed income yields soared and allowed the Federal Open Market Committee (“FOMC”) to initiate rate hikes of 25 bps in December 2016, March 2017, and most recently, June 2017.