Apart from an initial few hours of panic as the election result was becoming clear; the markets are now making a series of common bets, even before Trump officially receives the keys to the Whitehouse.
The US dollar has strengthened, US Treasury yields have increased, and US equities, in particular Financials and Industrials, have outperformed, all on the belief that Trump will deliver significant fiscal stimulus, decrease regulation and protect US companies. However, whilst a shot of adrenalin (or Botox!), may have been delivered to the US economic patient, it is far from certain which promises will be ratified, what the long term effects will be, and how the rest of the world reacts.
December 2016 could yet have some surprises in store for financial markets as geopolitics (Italy Referendum 4th December), and Central Bank policy announcements (ECB 8th December & Fed 13th December) take center stage. After Italy’s referendum rout, attention will now probably turn to what will likely be the most anticipated political vote of the first half of 2017: the French presidential elections. With François Fillon coming from nowhere to brush aside both Sarkozy and Juppé to claim the conservative presidential candidacy, a head-to-head with Marine Le Pen beckons. Pollsters believe it will be very difficult for Marine Le Pen to win though…
Key points of our Investment Committee:
- The outlook for US economic growth is improving.
- Reduction in the allocation to bonds in favour of equities.
- The developments of the US dollar should be monitored.
- Political uncertainties will continue to create volatility and opportunities.