Is Trump's rally over?

15 November, 2016

Is Trump's rally over?

The financial markets’ reaction to Trump’s victory seems to be abating early Tuesday with the dollar index retreating for the first time in six days after approaching its highest levels in nearly 13-years. Global bonds sell-off also took a break after wiping out almost $1.5 trillion from its value.

More interestingly, yields on Japan’s 10-year JGB’s rose above zero for the first time since September 21 and if they settle above zero, it will be for the first time since February 23, leaving only its Swiss rival in negative territory, suggesting that we’re approaching an end to the negative interest rate world.

Fixed income portfolio managers are challenged by Trump’s expected economic policies of more fiscal spending and borrowing to boost growth and inflation levels. However, it’s still not clear yet if the Fed will start responding to these policies by accelerating rate hikes expectations and whether a conservative republican Congress will pass an aggressive fiscal stimulus plan.

Sectors in U.S. equity markets diverged substantially. Financials and industrials continued to lead, sending the Dow Jones to a new record high while the technology sector was left behind weighing on heavy tech Nasdaq index. If the divergence continues within these major sectors it could send a warning signs to investors that the rally is not sustainable, especially since long term fixed income maturities have started to look attractive.

Investors will turn their attention to economic data with a busy calendar ahead for today. Growth figures and inflation data from around the Eurozone and UK will attract attention away from Trump. UK’s consumer prices are expected to show prices edged up again in October albeit slightly from September’s reading, meanwhile the retail price index is forecasted to exceed the 2% benchmark for the first time since 2014. Of course, UK’s rising inflation has a lot to do with the pound’s slump, but another factor to consider going forward is oil prices which will start losing their influence on inflation as they stand on the same levels they were a year ago. The same applies to the Eurozone where ECB plans of extending QE program seems to be challenged when inflation returns.


Source link  
Global equities hit by bearish pressure

Global markets took a sharp U-turn as the markets were in turmoil on the back of large crypto currency sell offs caused by regulation fears and a crackdown...

Dollar stabilizes after four days slide

The greenback’s sell-off paused early Tuesday after touching its weakest level since January 2015. Traders have been selling the buck across the board...

US equities hit another record high

The US markets have continued their hectic pace this year as the S&P 500 reached new highs on the back of economic figures. These figures showed...


Fixed income markets to dominate FX

The outstanding performance for equities which sent many major indices to record highs may have just paused. Asian stocks were trading broadly lower...

How longer the tired bull will keep running?

Led by Wall Street, global equity markets continued to enjoy one of their best starts in eight years. The Japan’s Nikkei 225 marched to a new 26-year high...

Critical week for dollar after a fragile start

After having the worst annual performance since 2003, the dollar continued to struggle in the first trading week of 2018. The dollar index fell to...


Robust economic growth

Equity investors across the globe are finding no reasons to take profits after an excellent performance in 2017. Asian stocks are trading at record highs after...

FOMC minutes - Will dollar bulls attack?

Investors kicked off 2018 on a positive note sending U.S. stocks to fresh highs on the first trading day. The optimistic approach on day one was...

Equities reaction on tax breakthrough

Asian markets woke up on Thursday to the news that Republicans had passed the long-awaited tax bill. President Trump is now just a pen...

  


Share: