U.S. equities have had a stellar run on strong growth and rising optimism around President Donald Trump’s tax reform. However, latest developments in the political landscape in the United States spell trouble for the Republicans.
Positives for Trump
GDP growth for the United States was revised up to 3.3% in the third quarter compared with 3.1% in the previous quarter. The third quarter reading was revised from an initial reading of 3%. This was the strongest quarterly growth reading in three years. Non-farm payrolls increased 228,000 in November, per the Labor Department.
Moreover, the unemployment rate came in at 4.1%, a 17-year low. This comes as a positive for Trump, who seeks to brand himself as a leader of the masses.
Risks Involved
However, all’s not well for the Trump administration. Democrat Doug Jones defeated Republican Roy S. Moore in the Senate election in Alabama, a deep red state which voted overwhelmingly for Trump in the November 2016 Presidential election. Moore had been accused of sexual abuse and child molestation, which might have been a factor for the relatively low support he received.
“We have shown the country the way that we can be unified,” Jones said. “This entire race has been about dignity and respect. This campaign has been about the rule of law,” he added.
The GOP Senate majority has slimmed to 51-49 after Moore’s defeat. This might create difficulties for the Trump administration to pass its key legislations.
Although the Senate passed the Republican tax reform, there are increased concerns around the differences in the versions of the House and Senate. Moreover, geopolitical risks weigh on the markets. Last month, North Korea launched a Hwasong-15 missile with improved technology that flew over Japan in a latest show of force.
Owing to the high uncertainty in the markets, we believe it is best to opt for low volatility. Hence, we will now discuss a few ETFs focused on providing exposure to the low volatility space of the U.S. equity markets.
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