One year on and the Trump rally is very much alive and well; U.S. dollar consolidating but further gains may lie ahead; GBP under pressure as May’s problems mount; Oil inventories eyed as oil rally continues.
One year on from Donald Trump’s election victory and U.S. equity markets are on course to open near record highs once again, having made stunning gains over the last 12 months – more than 30% in the case of the Dow and Nasdaq.
While many may claim that Trump’s achievements to date equate to very little given his difficulties repealing and replacing Obamacare, slower than expected progress on tax reform and minimal detail on fiscal stimulus, investors have clearly not been deterred as is evident by staggering gains in U.S. stocks. Of course, much of this may still be conditional on the President delivering on the latter two in particular and some is also attributable to the rally in global equity markets over the same period, but the Trump trade is clearly still alive and well.
This is despite the fact that the Fed has raised interest rates three times since the election and is likely to do so again next month, which many will have believed could have threatened the economic recovery and with that, the stock market rally. That is clearly not the case and with the economy having now come off two quarters of around 3% annualized growth, one may wonder whether there is any need for the spending element of the President’s plan to revive the economy. There certainly doesn’t appear to be the desire for it that we’ve seen for tax reform over the course of the year.
While political and geopolitical events have caused minor problems along the way, the rally has been very gradual and consistent with few hiccups along the way. In the absence of any major U.S. economic events this week, Trump’s tour of Asia will continue to attract the bulk of the attention, although I imagine the rhetoric coming from the meetings and press conferences will be broadly in line with what we’ve heard already. Assuming no slip ups along the way and no unexpected back and forth with North Korea – which is possible given the country is one of the main topics of conversation – there’s little reason to believe we won’t see more of the same in the markets.