Managing Expectations

How To Manage Post-"Trump Bump" Market Expectations

November 20, 2017

By Colin OShea
Securities Analyst 

Since the election a year ago, many individual stocks and most broad markets are reaching record highs, corporate earnings reports are trending up, and unemployment is at multi-year lows.  What we are witnessing is the “Trump bump”, the idea that the new administration’s pro-growth policies will build confidence, encourage spending, and boost economic activity

So far, so good.  Both the second and third quarters posted 3.0% GDP gains, the first since 2014.  But will it continue?

The Conference Board, a private economic ‘think tank’, projects U.S. economic growth at 2.8% annualized in the current quarter and 2.5% for all of 2018. With all the good things happening, how does this respected independent business group justify its projection of slower growth ahead?

A large part of the answer points to the Federal Reserve and its ongoing efforts to end a decade of stimulative policies coming out of the credit crisis.  It is expected to raise short term interest rates by a full percent by year end 2018, and long term interest rates should follow as it sells Treasury bonds purchased during the last several years.  These actions should act as a gentle ‘tap on the brakes’ for economic activity.

So we have a small disconnect – roaring markets today, but less robust economic growth tomorrow.  The Fed and the Conference Board are trying to manage expectations, each in its own way. 

Coming off a strong year, it is important for everyone to manage their expectations moving forward into 2018.  While we expect to see growth, the growth  may be more subdued for the upcoming year.  There will be short-term reactions of the market, however, remaining calm and focused on your long-term goals will lessen the impact on your investments. If you would like help assessing your portfolio’s readiness for 2018 and beyond, contact Security National Bank's Wealth Management to speak to a financial professional today.

Happy Thanksgiving from all of us at Security National Bank!