Friday, December 30, 2016

With a dearth of new data for market participants on this final trading day of 2016, there is one narrative switch we will need to keep in mind moving forward: the Fed will no longer holds the reins of controlling market activity; the U.S. Congress now will. Once Republican Donald Trump is sworn in as our 45th president, the Republican-majority Congress in both the House and Senate will now take this up.

In fact, one of these developments is actually called the REINS Act, which would give Congress the authority to overturn and roll back decisions made by the Executive Branch (read: Obama administration), presumably without having to involve the direct actions of the incoming president. But more than this — the removal of political gridlock and the tacit agreement to undo regulations in the finance and energy spaces especially — spells more unfettered congressional activity than we have seen since the earliest part of this century.

Cutting corporate taxes will also be a big part of this, and the following rationale is that it will be easier to repatriate corporate incomes in the U.S. as the Trump Era progresses. All of which means we can expect stronger earnings results from publicly traded companies, which would factor in propelling the markets even further higher. That said, lots of this good new feeling has already been priced in, so it remains to be seen if we can retain our lofty highs post-election or if we’ll see a notable pullback at some point in the near future.

For a comprehensive perspective on the 2017 markets, please read Zacks Director of Research Sheraz Mian’s latest Earnings Trends article:  Will the New Year Bring Earnings Growth?

Otherwise, Happy New Year to everyone in our Zacks family and network! We’ll see you in 2017!

Mark Vickery
Senior Editor

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