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Thank goodness the elections are over! I believe that was the message from the 525-point surge in the Dow on the day after the election. I know I will be glad that all the negative campaign commercials will be absent from our televisions for the time being.


Actually, our favorite analysts have more tangible explanations for the market’s enthusiasm for the election results. According to Federated Investor’s Linda Duessell, “markets tend to like gridlock and divided government for the increased certainty and fiscal continuity that it provides.” Investors do not like uncertainty, and this reduces the risk that there will be a major policy change that might produce a negative impact on the markets.

Phillip Orlando, Federated Investor’s Chief Equity Market Strategist, outlined the good news for investors in his weekly outlook:

“So Trump’s key fiscal policies likely will remain in place: tax cuts, deregulation, repatriation and immediate expensing of capital spending. Collectively, these have resulted in the fastest GDP growth in four years and the strongest corporate earnings growth in seven years. Business and consumer confidence metrics are at multi-decade cycle highs, unemployment is at a half-century low, wages are growing at their fastest pace in a decade and retail sales are the strongest they have been in seven years. In our view, these have helped spark the equity market’s rally over the past eight days, a trend we believe will grow to record highs over the balance of this year and into 2019.”

Opinion is split on the likelihood that Democrats and Republicans will find any common ground on issues like infrastructure, health care reform, immigration, and tax reform. It takes a real optimist to outline a scenario that could accomplish any major changes, but there is “happy talk” coming from the leadership on both sides. Stay tuned for more developments there.

As we quoted RJ Strategist’s friend Tony Dwyer last month:

“…it is essential to remember that politics may cause the market to gyrate, but Fed policy, availability of credit, economic growth and earnings cause the market to trend over time. All of these proven measures continue to be positive for equities…”

So we will keep our eyes on the Fed, economic growth and corporate earnings.


As you can clearly see on this chart from our friends at The Chart Store, our stock markets have historically followed a very positive path in the last half of a President’s term. October of the mid-term election year has typically marked the lows of the cycle, and the 3rd and 4th years following a Presidential election have generally seen positive markets. Following the pattern again this year, we believe we saw the market lows in October.

We have several fundamental reasons for being optimistic at this time. The recent drop in oil prices should take some of the pressure off inflation, the recent correction has resulted in some of the lowest P/E ratios in 40 years, and the recent “unambiguously positive “October Non-farm Payroll Report, as it was described by the TD Economics team, tells us the economy is still growing.

Headwinds include the uncertainty caused by Trump’s efforts to bring the Chinese in line with the “tariff wars”, but no one seems to be looking beyond the possibility that he might be successful. Kevin O’Leary of CNBC, in my opinion one of the most astute fundamental commentators on the air, recently outlined an enormously positive outcome for global growth if Trump succeeds in forcing China to open its markets and stop extorting technology from American companies trying to do business there. Again, stay tuned for any news on that front.

We are sticking with our endorsement of RJ Strategist Jeff Saut’s comments we quoted in the last edition of the “Crouch Connection”:

“Ladies and gentlemen, this is a secular bull market, and the cuties that call for a crash and/or a range bound market are missing the fact that secular bull markets last for 14+ years. In past missives, we have discussed where it began: in October 2008 when most stocks bottomed, March 2009 when the averages hit their nominal lows, or in April 2013 when the averages finally exceeded their previous all-time highs. You pick it! But, wherever you're starting point, there should be years left in this bull market.”

And from the most successful investor of all time, Warren Buffet:

"Whenever I hear people talk pessimistically about this country, I think they're out of their mind,"

We agree.


I hope we have made the case for you to continue to be optimistic in spite of the recent volatility in the market. We always enjoy conversations with our amazing clients and we hope you will call us if there is any support or assistance we can provide. We appreciate your business!


Registered Principal

Financial Advisor

Kay O’Connell

Research Assistant

Financial Advisor

Kim Blackburn

Branch Operations Manager

Any opinions are those of Dave Crouch and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James is not affiliated with and does not endorse the opinions or services of Federated Investor, Linda Duessell,

Phillip Orlando, TD Economics, Kevin O'Leary.

The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ

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