An Election Surprise, Stock Market Highs—and Good News for the Underpaid
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Between exploding cell phones, the loss of musical legends like Prince and David Bowie and an ugly election campaign season—to name just a few—2016 is a year a lot of us are eager to say goodbye to.

Yet despite its disappointments, it was actually a pretty good year overall for our money. The economy’s improving—it grew 3.2 percent in the third quarter, the strongest pace in two years. It’s likely that the stock market will end the year at record highs, unemployment sits below 5 percent and stubbornly low wages are finally starting to rise.

Here’s a refresher of the big financial developments of the year—and how things may play out in the year to come.

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1. Voters made some unexpected choices at the polls—and markets (over)reacted.

In June, Britain’s surprise vote to leave the European Union sent markets around the globe into near panic mode, with U.S. stock indexes falling about 10 percent. But within a few days, investors had realized the world was still intact—and the market had fully recovered.

Brexit has yet to actually happen: British Prime Minister Theresa May has indicated she’ll pull the trigger on the EU separation process in March, and it’ll take a projected two years to complete. But expect a flurry of speculation about its impact in the meantime.

Five months after the Brexit vote, experts predicted a surprise Trump win would devastate the markets. And they were right…for about 12 hours. Stock market futures tumbled overnight as Donald Trump’s surprise victory became clear, but fully recovered by mid-morning—and have since hit record highs.

The market’s so far responded well to Trump’s proposals and cabinet picks so far, but it’s unclear how his policies as president might play out, or affect markets.

Bottom line: The market is at record highs, but there’s still a lot of uncertainty, so fasten your seat belt. Making emotional investing decisions is almost always a bad idea. As any advisor will tell you, you’re better off sticking to your long-term investing strategy and goals.

2. We got great rates on debt, and we borrowed a lot.

Mortgage rates fell to record lows this summer: If you had excellent credit, you could get a 30-year loan with an interest rate below 3.5 percent. Mortgage applications and refinancing jumped as well, though they slowed as rates increased later in the year. (If you are ready to buy a home, though, you may want to lock in rates soon as they are expected to continue rising.)

Federal student loan rates also fell for those getting loans out this year—to a range of 3.8 to 6.3 percent. Of course, that’s small consolation as tuition rates continue to rise, requiring larger and larger loans. About seven in 10 graduates in the class of 2016 carried debt, and the average student loan balance was $37,172, up 6 percent from the year before.

Variable rates on loans and credit cards have been low, too. That’s helped boost the average car loan amounts (as have higher prices for new cars): Outstanding car loans topped $1 trillion this year. Credit card debt was also on track to hit $1 trillion by the end of this year, the highest level since 2008.

Money may not be so cheap to borrow in the coming year, though, as the central bank is expected to raise the fed funds rate this week and again in the coming year, which can affect how much banks and other lenders charge for things like—yes—mortgages, auto loans and credit cards.

Bottom line: If you’ve got debt with a variable rate, now’s a good time to double down on your efforts to pay it down. If the Fed keeps raising rates, variable interest rates will go up, too.

3. But we’re also getting paid better (some of us, anyway).

Average hourly earnings growth hit a post-recession high of 2.8 percent in October. And the latest Census report, released in September, found household income jumped 5.2 percent last year, the largest one-year increase since the bureau started keeping records in 1967. Various surveys indicate companies are planning to bump pay by an average of 3 percent in 2017, but lower unemployment means employees have a little more leverage to ask for more. (It costs employers money and time to replace someone, especially if the job market is tight and the position is hard to fill.)

Bottom line: For those of us who’ve been waiting for a decent raise, 2017 may be the year to ask for it. And for those of us who’ve been stuck in miserable jobs, it may finally be the year to start sending out resumes.

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