Asset Class Reports
Canterbury Review: Fourth Quarter 2016
U.S. Market Rallies After Surprise Election Outcome
- Developed market bond yields rose quickly and swiftly as a result of higher growth, higher inflation prospects, and faster than expected interest rate increases by the Fed. Moreover, markets are expecting President Trump to implement significant fiscal stimulus by way of infrastructure spending. As a result, pro-growth market sentiment led to a ‘risk-on’ rally which negatively affected U.S. Treasurys and other ‘safe haven’ assets.
- As 2016 drew to a close, U.S. equity markets anticipated that corporate tax reform, lessened regulation, and infrastructure spending would lead to faster economic growth along with higher inflation and interest rates. As a result, banks, commodity stocks, and small companies rallied while technology and health care stocks fell out of favor.
- Emerging markets sank during the quarter, led lower by India, China, and Mexico. Trump’s anti-free trade campaign rhetoric, the strengthening U.S. dollar, and higher U.S. interest rates contributed to the decline. Despite the decline, emerging markets equities finished the year ahead of the MSCI ACWI due to a strong first half.
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