During the fourth quarter of 2016, US equity markets rallied materially in reaction to Donald Trump winning the presidency and to Republicans maintaining control of the House of Representatives and the Senate. Investors seem to believe Trump’s platform of corporate tax reform, broad regulatory relief, infrastructure spending, and protectionist trade policies is confirmation that support for the US economy will shift from monetary actions to pro-growth fiscal policy. While we are not surprised that the equity markets rallied post-election, we believe the magnitude of the gains is a result of the significant repositioning in risk assets over a short period, and not necessarily investors assigning higher intrinsic values to individual securities. As investors, we welcome pro-growth policies and believe that new pro-growth fiscal policies are necessary to achieve earnings expectations in 2017 and 2018. However, we must acknowledge that margins and valuations for equities are near all-time highs and that the business and credit cycles are quite mature. To support current valuations and to expect further market gains, the credit environment must remain benign while companies increase capital expenditures to boost productivity and drive sustained earnings growth. We do not expect the transition from monetary stimulus to fiscal stimulus to be smooth, and we anticipate a material rise in market volatility over the short to medium term.
During the fourth quarter of 2016, the Saratoga Mid Cap Portfolio posted positive performance. Consumer discretionary, technology, consumer staples, and financials contributed to performance, while materials, industrials, health care, and energy detracted. The Portfolio benefited from not having any REIT exposure.
Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of a factual nature constitute opinions which are subject to change without notice.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Saratoga Advantage Trust mutual funds. This and other important information about the Saratoga Advantage Trust's funds is contained in the prospectus, which can be obtained by clicking here, or by calling (800) 807-FUND, and which should be read carefully before investing. The Saratoga Advantage Trust's funds are distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Saratoga Capital Management, LLC is not affiliated with Northern Lights Distributors, LLC. 1/16 © Saratoga Capital Management, LLC; All Rights Reserved.