Market volatility is head spinning

The volatility of markets since the election is head spinning.  After the massive gains on the day after election day 2 weeks ago, markets caught their breath and decided that the risks of uncertainty appeared greater than the opportunities.  The Fed seems to be hedging its bets on continuing interest rate reductions saying that any further reductions are data dependent.  Mixed into this reaction are President elect Trump's threats to fire the Federal Reserve chairman.  Powell's reaction is just tried it.  I am not going anywhere.  Given Trump's recent cabinet nominations it is clear that uncertainty and combustibility are part of our politics going forward.  The anti-institutional nature of these nominations will continue to unsettle markets.  The creation of the Department of Government Efficiency or DOGE with Elon Musk and Vivek Ramswamy as heads with drastic predictions of cuts that go beyond what is possible given the fixed expenses of social security, Medicare, defense spending, interest on existing federal debt, and meaner that cost reductions of the size discussed by Musk cannot happen without severe service reductions to Americans.  The market does not like uncertainty.

  2.3 Million Jobs: The Federal Workforce, in Charts - WSJ

What Can the Department of Government Efficiency Do? - The New York Times

Interest rates have anticipated a potential increase in inflation with potential tariffs, deportations and who knows what else awaits the economy.  With control of the levers of government a trifecta-Republicans control the executive and legislative branches-they will be able to pass legislation.  The first item of business will be immigration, but shortly after we have the TCJA sunsets in regard to marginal tax rates, SALT deduction, qualified business 20% deductions and many other very expensive tax reductions costing billions more over the next ten years, inflation increases are a real concern for the bond market and certainly the stock market going forward.  

We are in a wait and see approach understanding that financial planning provides clients with a long-term solution to uncertainty. Timing markets is always problematic but being prudent is always wise.