Investing

An Election Surprise, Stock Market Highs—and Good News for the Underpaid

Bob Sullivan

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.

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.

acorns+cnbcacorns cnbc

Join Acorns

GET STARTED

About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2019 Acorns and/or its affiliates.

NBC Universal and Comcast Ventures are investors in Acorns Grow Incorporated.