Bottom Line: A rapidly shifting political landscape and financial landscape, require repositioning. For example, I have long postulated that the $200 billion+ Vanguard Total Bond Market Index Funds are the biggest bubble in the financial world. With loads of interest rate exposure, these retirement plan stalwarts fell 2% on the week, undermining their “risk free” identity. Fortunately, for our clients, we rotated our portfolios in advance of this week’s move as inflation had already captured our attention. The Trump victory simply accelerated marketplace inflation recognition, delivering months’ worth of returns within just a few trading days. We have been awaiting a catalyst to initiate the last quartile rally of this historic bull market, and this may just be it. Trumps tax and regulatory policies will boost corporate earnings, which bodes well for the markets fundamental performance in 2017. Unfortunately, his volatile campaign antics do present unique tail risks that must be taken into account, but they are nearly impossible to handicap….like a terrorist event, natural disaster, or a Cubs repeat. Expect things to calm in the coming week as rapid repricing’s require curing periods.
Have a great weekend!
David S. Waddell
CEO, Chief Investment Strategist
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