What a year 2016 was for investors. An early year bear market has given way to a full-on cyclical bull market that has powered through Brexit, Donald Trump's U.S. presidential victory, as well as general weakness in economic growth and corporate earnings. At least for now, the market is choosing to look through a crescendo of macro and political noise (and change) and focus on the potential for cyclical recovery.

While there remain many uncertainties at the macro level, the first 100 days of Donald Trump's presidency in 2017 will be watched with high intensity by markets. This creates a setup for ongoing market volatility as well as likely stock and sector rotation. Knowing the stocks you want to buy and being confident enough to buy them during periods of weakness is going to be an ongoing necessity.

We expect that we will see lower headline corporate and individual tax rates, which will be important for U.S. companies that pay high U.S. tax rates, while foreign cash repatriation is also likely to happen. We would also expect a slowing and rolling back of some aspects of regulation and, given the upward trend that was already in motion, we should expect some further inflation, a modest interest rate increase cycle, and a general shift in investor expectations around these factors.

We would caution that there is an element of honeymoon around U.S. politics at present. The best days to be buying stocks were in the first few days after the U.S. election result, and, even better, in the period before the result. We would emphasize that, today, there's a need to think longer term and potentially trim some of the initial winners as policies become more distinct from the promises of an election campaign that became extreme by anyone's measure.

Consumer staples, emerging markets, and secular growth have all taken a meaningful hit in the weeks following the election. This makes sense in a world where interest rates in the U.S. are likely to go higher, and we may begin to see trade conflicts as we move forward into 2017. However, we believe some of these movements have already been overdone. Our nature is always to be carefully contrarian, and so we are looking for attractive assets in emerging markets, but we are moving cautiously. Some growth staples names may finally be cheap enough for us to own, but our conviction remains in growth firms on the right side of change where individual companies are taking market share and monetizing this change and disruption.

The clearest beneficiaries of the shifts we are seeing are financials and some segments of health care, but selectivity is now paramount. We continue to think there is too much energy in the world and there will still be too much energy if Trump "drills, baby, drills" in the U.S. We are also less enthused about industrials and commodities where we think valuations are less attractive.

Ultimately, it remains important to go stock by stock and understand what policy changes will be real. This implies a watchful approach on policy, and an understanding of where the real impact may lead to improving economic returns. Avoiding disappointment over the next year will be crucial, especially with expectations at higher levels and earnings improvement for many cyclicals a 2018 event, if indeed the improvement actually transpires as a result of fiscal policy or a meaningful uptick in economic activity. The bottom line is we remain focused on picking stocks where we have an insight and can acquire unanticipated growth and improvement.