In this month’s update, we’ve addressed some of the major headlines that influenced markets in November, along with insight into what these developments could mean for you as an investor.
Looking back on November, no one could argue that it was a boring month. After a long, exhausting presidential campaign, Election Day brought results that few people were expecting. Just that day, the New York Times had given Hillary Clinton an 85% likelihood of winning, based on a number of both state and national polls.
We all know how the story actually played out. And what might be even more surprising than Donald Trump’s victory is how the markets responded. Rather than experiencing the sell-offs that many experts predicted, the major indexes have shown tremendous growth since the election.
In fact, the Dow added over 1000 points in November and went above 19,000 points for the first time ever. The S&P 500 and NASDAQ also reached record highs last month. And these noteworthy market increases are just a few of the positive economic indicators we saw in November.
In last month’s update, we pointed out how the Gross Domestic Product, or GDP, had its biggest gain in two years, showing that the economy was growing more quickly than most economists expected.
Well, when the government released its revised GDP numbers in November, they revealed that the economy grew even faster than previously thought. After years of sluggish growth, we’re happy to see the economy picking up its pace once again.
The employment picture is showing an equally positive outlook, too. Unemployment remains low, and personal incomes gained another 0.6% in October. If you look at this year’s gains as an annual rate, incomes are up 5%. These important increases mean that Americans have more money in their pockets, and will likely increase their spending to match.
Consumer spending is already up 4.2% over last year and we anticipate it will continue to grow, thanks to greater personal incomes and low unemployment. Since consumer spending accounts for more than two-thirds of GDP, the combination of stronger employment, wages, and spending could help advance our economy even faster. We expect that rising income and consumer spending will result in a solid holiday shopping season, which will further help GDP growth.
One place where Americans may feel a budget tightening is when they go to the gas station.
On November 30th, OPEC — the cartel of 8 oil-producing countries — agreed to at least somewhat limit their supply to the market, in hopes of driving crude oil prices above their currently low levels. As a result, you may experience higher gas prices in the coming months. But, we don’t anticipate crude oil will climb anywhere near the record highs of 2008, which were nearly three times more expensive than what the market is currently paying.
These days, the U.S. and other countries outside of OPEC produce more oil than in the past, which helps to keep the prices lower than during the Great Recession.
As we look across the data for November — and 2016 as a whole — we believe the economy is continuing to strengthen. All signs currently point to the Federal Reserve raising interest rates when it meets in December. Fortunately, the markets and economy seem poised to withstand moving back toward more historically normal rates.
Between Brexit, the U.S. presidential election, and more, this year has reminded us again and again that no one can predict the future. But, I’m happy to say that recent economic reports and market performance give us many reasons to be thankful, and to look toward the future with anticipation.
That’s it for this month’s educational economic update. Please remember that nothing in this update is a specific recommendation. If you would like to discuss your personal financial situation, please give us a call at 913.402.6099. We’d be happy to talk to you.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial advisor with a fresh approach to financial planning and investment management. Committed to busy professionals and entrepreneurs in Kansas City. For more information, visit https://www.chladekwealth.com.