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Fourth-Quarter Market Recap and Year-End Review
Can Trump Deliver on Promises Made?

By: Nick Perini, CFA
Saturday, December 31, 2016

What once seemed improbable, if not impossible, is now a reality, and the markets have confidently voiced their opinion. The performance of the equity markets since the Presidential election reveals that investors believe the policies of President-Elect Donald Trump are good for the American economy and American business. Stocks are up, bonds are down, and everyone is waiting to see what Donald Trump can do once he is sworn in on January 20.
The S&P 500 was up 3.82% in the fourth quarter, the Dow Jones Industrial Average was up a blistering 8.63%, and the Nasdaq Composite was up a more paltry 1.34%. The S&P 500 finished the year up 11.96%, the Dow Jones Industrial Average up 16.39%, and the Nasdaq Composite finished the year up 7.50%.

Different sectors of the economy had very different reactions to the election of Trump, as can be seen by the returns during the quarter. The Financial Sector, which benefits from increasing interest rates and the likelihood of decreased regulation, saw the largest gains in the fourth quarter, returning 21.10% for the quarter and 22.80% for the year. The Energy Sector continued its already strong performance in the fourth quarter. Energy is benefiting from rising oil prices and what is believed to be a fossil-fuel-friendly administration. Energy returned 7.28% for the quarter and 27.36% for the year.

On the other hand, the Healthcare Sector found itself in the spotlight going into the election due to what many believed to be unfair price increases for lifesaving drugs. This bad publicity, along with the uncertainty around Obamacare, has weighed on the sector as a whole. Technology is another sector that underperformed the market during the quarter.

Interest rates moved higher throughout the quarter causing bonds to lose value. The Barclays Intermediate Government/Credit Index had a return of -2.1% in the fourth quarter. The Index returned +2.1% for the year.

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