Investment Update | Saratoga National Bank

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Investment Update

By Rick Schwerd | November 8, 2024

Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for our next regular update on November 15.

Election 2024 and the Markets

As the 2024 election is mostly completed, Former President Trump has decisively won a second term and will likely be the first Republican presidential candidate to win the popular vote in 20 years. Republicans also flipped control of the Senate, garnering 52 seats with three races still too close to call. Control of the House remains undecided as votes are still being counted in a number of races. However, it appears that Republicans have a slight advantage to hold control at this point.

Markets reacted positively to the outcome, notching their fifth-best one-day returns ever on Wednesday. The Dow Jones Industrial Average shot up more than 1,500 points and the NASDAQ added more than 500. The small-cap Russell 2000 was at the forefront, increasing by 5.8 percent on the day. Most indexes added to gains on Thursday. 

The strong returns were likely a result of two factors. Market participants breathed a sigh of relief after receiving a definitive outcome. There was a fear of a protracted legal fight due to a close decision. Secondly, former President Trump’s tax and regulatory policies are considered more favorable to equity markets.

Market-Impacting Policies

  • Immigration – One of the focuses of Trump’s campaign was to crack down on illegal immigration and improve security on the southern border. This could result in higher labor costs, which is inflationary. However, given the fact that job openings are down nearly 5 million over the last couple of years, the overall effects might not have much of an impact.

  • Trades/Tariffs – Tariffs were also a significant focus of Trump’s campaign. Chinese goods, produced in or going through Mexico, will be a major area of concern. In isolation, tariffs raise the cost of products and are therefore inflationary in nature. However, it remains to be seen what is actually implemented and what the overall effects will be.

  • Taxes – If the Republicans do take the House, they are likely to extend and possibly add to all parts of the 2017 tax cuts. The tax cuts on individuals were generally set to sunset in 2025. The budgetary effects remain a big concern as the current deficit is a contributor to the higher interest rates we are currently seeing. If Democrats take the House, then predictions may become cloudier. For example, negotiations may result in some individual tax cuts being extended with a small increase in the corporate tax rate.

  • Regulation – Republicans ran on reducing regulatory burdens and decreasing the role of government in the economy. This should increase economic growth, substantially increase the number of mergers and acquisitions, and allow for more energy production.

Looking Forward

We caution clients not to get too excited or distressed following elections. Equity markets have generally gone higher no matter who is in the White House or who controls Congress. For now, the election results are a net positive for markets. However, tariffs, immigration policy and the possible return to the unsettled nature of Trump’s first term could result in uncertainty and volatility. Budget deficits, inflationary pressures and equity valuations remain concerns.

We are cautiously optimistic as we look forward. Consumer spending accounts for approximately 70 percent of U.S. GDP. Given a solid labor market, increasing home prices and investment accounts, the consumer is in a strong position to continue spending. Artificial intelligence (AI) and automation are boosting productivity. Finally, the Federal Reserve is in an easing cycle. All of these are positive tailwinds for equity markets.

As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.

About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Saratoga National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships. He is also co-portfolio manager of the proprietary North Country Large Cap Equity Fund.


 

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