5 Investment Themes To Consider For 2017

1. Emphasis on U.S. stocks over International stocks

While not abandoning international equities altogether (see Theme 3 below), I believe that it is worthy to consider overweighting U.S. equities to start 2017 given heightened optimism for U.S. economic growth and accompanying U.S. stock market growth in the New Year as a result of the election of Donald Trump as the new President of the U.S., backed by a Republican controlled U.S. Senate and House of Representatives. According to TheWeek.com, this is only the second time since 1929 that Republicans have been in control of all three areas. Additionally, having all three legs of the Federal Government stool controlled by one party may provide some tailwinds to U.S. stock market investors in 2017. To this end, based on a MFS research report entitled, “Primaries, caucuses, and elections…oh my!“, it appears from the chart below that although the combination of a Democrat President and a Republican Congress has produced the best historical returns from 1961-2010, on average, for the stock market (which is defined in this case by the S&P 500 index), the stock market still experienced an average return of 12.1% when the White House and Congress were controlled by the same party.


Please noteThe Dow Jones Industrial Average (DJIA) measures the U.S. stock market. Figures referenced are price change only and do not include the impact of reinvested dividends. The Standard & Poor’s 500 Index (S&P 500) measures the broad U.S. stock market. It is not possible to invest directly in an index. Past performance is not a guarantee of future results.

As a result, the psychological achievement of “Dow 20,000” may serve as more of springboard for the next leg of this secular bull market as opposed to being a market top for this bull market rally that some are suggesting.

2. Consider different market capitalizations to help deal with strong U.S. Dollar

Rising interest rates in the U.S., coupled with declining or stagnant interest rates across the rest of the globe, could result in a stronger U.S. Dollar, despite the stated reservations of this happening by President Trump. This could, in turn, put pressure on multi-national U.S. companies that derive a significant portion of their revenue overseas.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within ...

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