Politics still impact financial markets in the short term, as shown by the Dow Industrial Average falling 373 points on May 17. On that day, former FBI Director Robert Mueller was appointed special counsel to investigate Russia’s attack on our 2016 election and possible ties between Russia and the Trump campaign. Although this development threatens Trump and his agenda, the drop was short-lived: the U.S. market recovered in a few days and went higher than it was the day before Mueller’s appointment.
There is more and more evidence domestically and globally that markets are not paying close attention to politics, whether U.S. or international. Ruchir Sharma, Chief Global Strategist at Morgan Stanley, writes in the May 30, 2017 New York Times, “Where is the Trump Slump?” We experienced the Trump bump, but that is now fading as legislation gets stuck in political disunity.
In spite of this political setback, U.S. consumer credit scores reached a record high this spring with the average credit score at 700. This means more available credit as U.S. consumer spending is being helped by income growth, low inflation, low interest rates, and rising household wealth. These conditions are where market attention is directed, not to the drama in D.C.
International markets continue to perform better than the U.S., as our international and technology funds performed the best in May and year-to-date. Our Cash Reserves and Stable Growth strategies have been helped by the U.S. 10-Year Treasury being range-bound between a yield of 2.18% and 2.61% this year. The U.S. 10-Year closed the month of May with a yield of 2.19%. Our Stable Growth accounts are performing as we expect with positive returns and low volatility.