President Trump is now in office. How are markets reacting?

In this week’s video update:

  • The U.S. S&P 500® index is down for the week. Is Trump to blame?
  • Yellen weighs in on likelihood of U.S. Federal Reserve rate increases.
  • Emerging markets (EM): How vulnerable are they to Trump’s policies?

It’s Inauguration Day for the filming of this episode, at the end of a week when the S&P 500 Index is slightly down. The question is: Did U.S. equity market’s run too far too fast?

Adam Goff, managing director, investment practice is joined by Sophie Antal Gilbert, program director, advisor insights, to discuss the market’s early reaction to Trump’s Inauguration Day.

Goff noted that from early November to mid-December 2016, U.S. equity markets, as measured by the S&P 500®, did grow based on assumptions of what might happen with taxes, fiscal policy, and other platform positions of the Trump administration. Goff’s reaction to this week’s slight drop-off? “We wouldn’t read too much into it.” Goff noted that Russell Investments strategists are taking a wait-and-see attitude and reminded investors that this small dip certainly does not erase the gains that led up to mid-December.

Trump vs. Yellen

While the inauguration took the spotlight this week, U.S. Federal Reserve Chair Janet Yellen also shared her views that the U.S. economy is on firm enough footing to allow for interest rate increases. Goff agreed, pointing to the fact that U.S. unemployment numbers are at approximately 4.7% and that U.S. inflation is starting to creep up. “I think it is very appropriate for her to be laying the groundwork for a couple of rate rises this year,” he added.

Eurozone and emerging markets 

Goff also weighed in on European and emerging markets stocks. Russell Investments strategists are currently bullish on European stocks, based in part of a projection of a 2% annual economic growth rate for the eurozone, an increase from their 2017 Global Market Outlook.

Emerging markets, according to Goff, are more of a mixed bag. While the Chinese economy shows many signs of strength, Goff noted that emerging markets may be vulnerable to some of the potential issues raised by Trump’s inauguration, including U.S. trade policies and the strength of the U.S. dollar.

Watch the video now.

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