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How a Central Election Year Issue Affects Your Portfolio

September 22, 2016

A prominent theme of this election season has been Wall Street vs. Main Street – the perception that Wall Street has benefited even as the middle class is squeezed.

capturePlacing politics aside, the Wall Street vs. Main Street narrative has implications for the stock market and your portfolio.

Rising corporate profits have contributed to the eight-year long bull market in stocks. Globalization has boosted corporate revenues by opening up new end markets, and reduced costs via globally sourced materials and labor. Proponents of globalization note that Americans have enjoyed access to cheaper goods and services, while skeptics point out that foreign competition has hurt middle class wages.

Some have suggested that globalization has now run its course, and an era of “de-globalization” has begun. Lets consider Great Britains vote to leave the European Union (“Brexit”) as “Exhibit A”, and controversy over the free trade agreements, including NAFTA and the proposed Trans-Pacific Partnership as “Exhibit B”.

An additional dynamic is that an increasingly tight U.S. labor market means that wages may soon rise good news for working Americans, but a potential threat to corporate profits.

In short, the unfolding of this narrative — so central to the economic, societal, and political landscape has implications for financial markets and portfolios, as well.

 

This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.