A prominent theme of this election season has been Wall Street vs. Main Street – the perception that Wall Street has benefited even as the middle class is squeezed.
Rising corporate profits have contributed to the eight-year long bull market in stocks. Globalization has boosted corporate revenues by opening up new end markets, and reduced costs via globally sourced materials and labor. Proponents of globalization note that Americans have enjoyed access to cheaper goods and services, while skeptics point out that foreign competition has hurt middle class wages.
Some have suggested that globalization has now run its course, and an era of “de-globalization” has begun. Lets consider Great Britains vote to leave the European Union (“Brexit”) as “Exhibit A”, and controversy over the free trade agreements, including NAFTA and the proposed Trans-Pacific Partnership as “Exhibit B”.
An additional dynamic is that an increasingly tight U.S. labor market means that wages may soon rise good news for working Americans, but a potential threat to corporate profits.
In short, the unfolding of this narrative — so central to the economic, societal, and political landscape has implications for financial markets and portfolios, as well.
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