The fourth quarter started off with stocks under pressure leading up to the November 8 U.S. Presidential election. After the election, the S&P 500® Index experienced a 4.6% rally, led by sectors previously out of favor such as financials and industrials.
Investor sentiment changed dramatically in the second half of the year and this change only accelerated after the election. Formerly favored high-dividend paying sectors such as utilities and consumer staples underperformed other sectors that had better growth prospects given the pro-business/pro-growth platform of the winning candidate. Sectors that had previously seemed like a defensive destination for investment dollars continued to lose luster in favor of lower-yielding ones. This quick change in market sentiment is a good reminder that over the long-term, a well-diversified portfolio allows investors to capture the market’s sudden twists and turns much better than a concentrated bet on a few sectors.