Key Questions

As of this writing (mid-day on Wednesday, November 6), the election results are in, and the outcomes are largely known. Donald Trump will be returning to the White House, becoming only the second person in US history to be re-elected to non-consecutive presidential terms. His victory was a convincing one which is important for regardless of one’s political affiliation, most everyone should take some comfort knowing that a lengthy, protracted and disruptive transition period will seemingly be avoided. This partially explains today’s stock market rally.

With the US presidential election fast approaching, certain sectors may exhibit considerable volatility. Such may especially be true with the energy sector, begging the question: who wins and who loses under a new administration?

In the past few days, there has been a noticeable shift in the bond market that investors should pay attention to. Since July of 2022, the yield on short-term bonds has exceeded the yield on long-term bonds. This is known as “an inverted yield curve” and is not normal.

After raising interest rates by the largest amount (and at the fastest pace) over the past two years, The Federal Reserve (“The Fed”) is poised to cut interest rates when it meets later this week. There is little debate over that; it is all but guaranteed.

There’s a harsh sounding axiom in the financial lexicon that says “Economic expansions don’t die of old age. Rather, they are murdered by the Federal Reserve”.

Over the past three years small caps have underperformed large caps by the widest margin (-50% underperformance) since the dot-com bubble. Following a powerful rally in small cap equities over the past several trading sessions, investors may be wondering if this rally will continue and if adding exposure to this asset class makes sense.