Markets Adjust to Political Climate Change

Since the election, investors have focused on the positive aspects of President Trump’s surprising electoral victory and the end of U.S. legislative gridlock. There will likely be times in the year ahead when the more worrisome, controversial initiatives pushed by the Trump administration will rattle investor confidence—at which point we would view U.S. equities as attractive. Although equity valuations are elevated in the U.S. versus Europe, Japan and many emerging markets, we are still confident that earnings will grow robustly on a per-share basis as economic growth, tax reform and a sharp turnaround in energy-sector profitability push year-on-year earnings growth higher.