The legislative trifecta of regulation rollbacks, tax cuts and infrastructure spending has been somewhat of a dud, at least in Washington. Wall Street celebrated too early as always, and the market drivers have shifted as a result. The Trump trade is on the backburner.
Trump’s agenda drove the market in the first quarter. Now we are seeing more of a setback, starting from the failure to repeal and replace Obamacare. “The markets are now discounting Trump. Everyone figures longer negotiations…and in a more moderate way,” says Tim Clift, chief investment strategist for Envestnet | PMC.
That puts more of the onus on the Fed. It wasn’t too long ago when the central banks were the market driver. They sat out a few months. Now they are back. Between the European Central Bank going through its own tapering of bond and derivatives purchases and the Fed raising rates, monetary policy is back in vogue.
“The Fed is more skillful at managing market expectations and handling market volatility than the Trump administration, so that should quell the markets to some extent,” says Clift.
Valuations are surely stretched. We are coming to the end of an eight-year bull market and no one should be surprised by a correction in the next 12 months, he says, adding that prudent investors should allocate to asset classes that will help protect from drawdowns.
“This is the time to adjust portfolios to make sure it can whether a downturn,” Clift says. “That’s what we are focused on right now: the Fed and making sure portfolios are positioned for the potential of a market correction.”
Envestnet is a financial services technology company serving some 54,000 RIAs nationwide, including 16 of the 20 largest banks in the U.S. The PMC portion of the company is its portfolio consulting group. Envestnet’s investor platform also develops and offers its own investment models and portfolios. As a consultant, PMC leverages its research and the Envestnet platform to access the widest range of models and strategies available for its users. Market Drivers Have Shifted
The legislative trifecta of regulation rollbacks, tax cuts and infrastructure spending has been somewhat of a dud, at least in Washington. Wall Street celebrated too early as always, and the market drivers have shifted as a result. The Trump trade is on the backburner.
Trump’s agenda drove the market in the first quarter. Now we are seeing more of a setback, starting from the failure to repeal and replace Obamacare. “The markets are now discounting Trump. Everyone figures longer negotiations…and in a more moderate way,” says Tim Clift, chief investment strategist for Envestnet | PMC.
That puts more of the onus on the Fed. It wasn’t too long ago when the central banks were the market driver. They sat out a few months. Now they are back. Between the European Central Bank going through its own tapering of bond and derivatives purchases and the Fed raising rates, monetary policy is back in vogue.
“The Fed is more skillful at managing market expectations and handling market volatility than the Trump administration, so that should quell the markets to some extent,” says Clift.
Valuations are surely stretched. We are coming to the end of an eight-year bull market and no one should be surprised by a correction in the next 12 months, he says, adding that prudent investors should allocate to asset classes that will help protect from drawdowns.
“This is the time to adjust portfolios to make sure it can whether a downturn,” Clift says. “That’s what we are focused on right now: the Fed and making sure portfolios are positioned for the potential of a market correction.”
Envestnet is a financial services technology company serving some 54,000 RIAs nationwide, including 16 of the 20 largest banks in the U.S. The PMC portion of the company is its portfolio consulting group. Envestnet’s investor platform also develops and offers its own investment models and portfolios. As a consultant, PMC leverages its research and the Envestnet platform to access the widest range of models and strategies available for its users.