What a week it was for the stock market as well as for the United States of America. Late Tuesday night as the Presidential election seemed up for grabs, the Dow Jones Industrial Average futures fell by more than 700 points, and it seemed as though a Trump victory might lead to a market collapse Wednesday. The major indices had rallied in a big way on Monday, and the upswing continued into Tuesday’s close. The late-night plunge in the Dow futures was surprising, but when the dust settled, and the election was decided, the stock market rallied just the same.
This election was an ugly one, but investors somehow decided that whether their candidate had won or had lost, the economy would survive and maybe even prosper. We are still stuck with a divided nation, but from an investment standpoint, the stock market chimed in with a big bout of optimism that took the Dow to an all-time high on Thursday. For the week, the Dow rose 5.6%, the Nasdaq gained 3.8% and the S&P 500 lifted by 3.8% as well. So how did this occur with so much division in the election?
That is the big question as we head toward 2017. How can a completely divided country have a stock market drifting toward and hitting all-time highs? One would think that the stock market would be down 10%, 20% or even 30%, but the major indices somehow rallied. Maybe our country is better off than the election had us feeling, and this week’s up market signals that maybe better days are ahead for an economy that keeps hanging tough. Maybe politics have less to do with the economy than we have ever thought. Who could have imagined the Dow at an all-time high after the ugly political process we just went through over the past 18 months?
But through it we did go, and it ended peacefully, without legions of lawyers and contentious post-election battles and challenges. Hats off to both candidates, and their immediate responses and acceptance of the outcome were probably the reasons why we saw the stock market react in such a positive manner. Even the small-cap Russell 2000 rocked 10% this week, and we all know that small caps are a great indicator of broader market sentiment. Seeing the Russell 2000 soar this week is a very bullish sign for the rest of the year, so hopefully this is a plus as we head toward 2017.
The funny and outrageous thing the Gorilla saw on Friday was that President-elect Trump was “Tweeting” again. His inner-circle staff had taken away his ability to “Tweet” in the days leading up to the election, but after a big win, maybe it is okay to give him back his iPhone and tweet privileges much like parents do with 13-year olds. His staff did not want “The Donald” to launch any troublesome tweets in the final stages of his campaign. It apparently was a smart decision, and he ended up winning the election.
That said, the election is behind us, and it has been amazing how fast this nation returns to business. The big question now is what the Fed will do with interest rates at its December meeting. The Dow has hit a new high, and the yield on the 10-year Treasury is back above 2%. Jobs numbers were good for October, but not all that great, and the time does seem right for a rate hike. The zero interest rate policy (ZIRP) now seems dated, and the promise of the “normalization” of interest rates has a green light, especially with the stock market performing so well.
This was a monumental week for the stock market, and we might have the Thanksgiving and Santa Claus Rallies on the way. There is also the New Year’s Rally and the “January Effect” in play as well, so the bullish camp is feeling good. The Gorilla wishes each and all a relaxing Fall weekend, and with this week’s lift, the bulls are particularly pleased. Again, have a great weekend, and we will be back in action on Monday!
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