The document analyzes the effects of presidential elections on markets, highlighting that while the S&P 500 rose 6% post-election, actual policy changes remain unclear. It emphasizes potential benefits from tax reform and rising interest rates, while cautioning that the timing and influence of these policies on economic growth will take time to manifest. The document concludes by advocating for a measured perspective on leadership changes and their long-term impacts.

1. Market Perspective – January 2017
Experience Insight Impact
biegelwaller.com
Overview: While presidential election cycles can move markets materially, the impact from
policy moves may take many years to unfold and in many cases are limited in comparison to
what some market participants expect. With Inauguration Day upon us, we use this month to
review how policy moves affected markets historically, in order to determine how markets will
take shape with a new administration in Washington.
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2. Experience Insight Impact
Since the Election…
• Since Election Day, the S&P 500
has advanced 6%.
• So far, very little is clear in
terms of actual policy changes.
• Investors are optimistic that tax
reform will occur.
• Investors also see a better
regulatory landscape.
• The promise of fiscal stimulus is
driving growth optimism.
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Ten Year Treasury Yield

3. Experience Insight Impact
Dollar Strength
• Since the election, the U.S. dollar
index rallied 6.4% to a 14 year high of
103.30.
• While the recent rallies have been
impressive, the dollar index, currently
at 100.62, is considerably lower than
the all-time high of 164.72 (reached in
February of 1985 during Reagan’s
presidency).
• A strong dollar will inevitably hurt U.S.
exporters. In other words, while we
do not dismiss further dollar strength,
moves such as the one since the
election should normalize over time.
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Ten Year Treasury Yield
U.S. Dollar Index

4. Experience Insight Impact
Rising Interest Rates
• Policy moves have stoked the potential
for higher inflation which in turn has
bond yields surging. For instance, the
yield on the 10-Year Note has risen from
1.8% to the recent high of 2.6%.
• However, from a longer historical
perspective, bond yields are still close to
record lows. Jeff Gundlach, of
Doubleline, mentioned that the 10-Year
yield at 3% would put an end to the
bond bull market.
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Ten Year Treasury Yield
10-Year Note Yield

5. Experience Insight Impact
Historical Perspective
Initial Excitement Has Occurred Before:
Oscar Shafer, of Rivulet Capital, recently reminded us in the 1/15/17 Barron’s Roundtable that, “From the time
Ronald Reagan was elected in November 1980 until he was inaugurated in January 1981, the market was up 9%.
It then fell about 30% through August 1982.” He is quick to point out that he is “not predicting that, but we have
had a lot of euphoria.”
Presidential Prowess and Cabinet Do Not Necessarily Correlate with Economic Growth:
Scott Black, of Delphi Management, was quoted in the same Barron’s article: “The Wall Street Journal published
an interesting article recently showing that presidential administrations whose appointees have a lot of
experience, especially in business, don’t always produce the strongest economic growth. The Kennedy
administration’s top officials had the least amount of experience, but the highest growth rate of per-capita GDP,
at 4.2%. Reagan and Bill Clinton had more people with experience, and GDP rose 2.5%. The administrations of
George H.W. Bush and George W. Bush had people with the most experience, but posted the worst growth, at
0.7% to 0.8%. While Trump might do good things like deregulate parts of the economy, there is no guarantee
that America is going to return to an earlier, more robust growth rate.”
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6. Experience Insight Impact
Presidential Power Limits
A recent NY Times article by Neil Irwin has several additional nuggets of wisdom:
• “Presidential economic records are highly dependent on dumb luck where the nation is in the economic
cycle.” He points out that the President has “no control over the demographic and technological forces that
influence the economy.”
• He continues, “Even in areas where the president really does have power to shape the economy —
appointing Federal Reserve governors, steering fiscal and regulatory policy, responding to crises and external
shocks — the relationship between presidential action and economic outcome is often uncertain and hard to
prove.”
• Fiscal Policy requires Congress. “Presidents can set direction, but not steer the ship themselves.”
• Timeframe is important. Irwin argues several examples, “The downsides of regulating banks poorly might
show up as a crisis a decade down the road. The benefits of better infrastructure will tend to show up over
many years. The payoffs of well-designed education policies come to fruition as young people enter the labor
market with better skills years later.”
Irwin concludes: “None of this means that presidents can’t do a lot to make the United States economy more
dynamic and productive. It’s just that doing so could take a great while. It’s hard to prove that this or that policy
was the source of the good times. In the short run, all those other factors have a more direct, measurable effect
in shaping whether a moment in political history produces an economy we remember fondly.”
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7. Experience Insight Impact
Tax Reform is Critical
While the nature and amounts of tax reform are highly uncertain, the wide expectation is that this
could be a crucial step for future earnings growth. According to Barclays, tax reform on its own
could add 15%+ to S&P 500 earnings. A wide range of companies will likely receive at least some
benefit from broad tax reform.
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8. Market Perspective – January 2017
Experience Insight Impact
biegelwaller.com
Conclusion: With a new change in leadership, it is important to maintain a proper perspective.
While there are potentially growth-enhancing measures that market participants have assumed,
the implementation and affects will likely take time to impact our economy. Over the upcoming
months, we will monitor the policy moves that may shape the long-term growth prospects,
which may in turn affect global markets.
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9. Experience Insight Impact
Disclaimer
Opinions expressed in this commentary may change as conditions warrant and is for informational
purposes only. Information contained herein is not intended to be personal investment advice for
any specific person for any particular purpose. We utilize information sources that we believe to
be reliable but cannot guarantee the accuracy of those sources. Past performance is no guarantee
of future performance; investing involves risk and may result in loss of capital. Consider seeking
advice from a professional before implementing any investing strategy.
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