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Trump’s unexpected impact on markets in seven charts

Donald Trump’s November victory ignited the steepest rally from election day to inauguration for a first-term president since John F. Kennedy won the White House in 1960.

The charts below tell the tale of the vigorous, and in many ways unexpected, reaction to the rise of the billionaire property developer to the pinnacle of American politics.

The S&P 500 index, a broad measure of the performance of large US companies, has climbed 6 per cent since election day. Wall Street has not posted such a strong run from a president’s first-term election win in more than half a century, when the S&P 500 climbed more than 8 per cent after JFK beat then vice-president Richard Nixon.

Over the same timeframe, only the advance following Bill Clinton’s second election stands with JFK in topping the Trump run.

“Investors have fully bought into Trump’s promise to ‘make America great again’: activity will be stronger and trade deals more favourable to the US. Inflation and interest rates are heading higher,” said Keith Wade, chief economist at Schroders.

Despite initial expectations from many investment houses that the Washington outsider known for his unrestrained and controversial rhetoric would set off a tumble for US stocks, the outcome of the election heralded a change in stock market leadership.

The S&P 500 financials sector got a strong boost from the election amid expectations that Mr Trump will seek to loosen regulations, spark economic growth and reduce taxes. Those factors, which are bullish for banks because of their sensitivity to the overall economy, also inspired hopes that interest rates will begin to rise more quickly.

Banks, insurers and other groups in the sector have been hoping that rates would bounce off historic lows — a boon to their bottom lines.

The election has provided a tailwind to the shares of small, publicly traded US companies. The Russell 2000 index is up 12.7 per cent since November 8. The index had fallen into a bear market early in 2016.

Strategists have pinned the Russell 2000’s strong run on expectations that more domestically-orientated companies would thrive in an environment marked by higher economic growth and protectionist trade policies.

Looking more broadly, global equities have tacked on $2.5tn in value since the election, according to data compiled by Bloomberg. US stocks alone have added $1.6tn in market value.

In contrast, the market capitalisation of Mexican stocks has tumbled 19.8 per cent, or $71.9bn over the same timeframe. Mexico’s currency has also been one of the biggest losers since the election, shedding over 16 per cent of its value versus the dollar since then. Notably, unlike some of the other post-election losers, the peso has not enjoyed any recovery in 2017.

The global bond market has suffered dearly, sapping the broad Bloomberg Barclays Multiverse index of $1.6tn in value since Mr Trump’s election. The sharp move lower represents a stark change of direction from earlier in 2016 when jitters about the global economy sent prices to record peaks and yields to historic lows.

The improved outlook for economic growth and inflation that proved bullish for stocks was damaging for bonds that generally provide fixed income streams and are more desirable when rates are low.

The dollar has been a beneficiary of Mr Trump’s election. Expectations that US monetary policy will begin to diverge more sharply from other major global central banks, notably the European Central Bank and Bank of Japan, has sent the dollar index appreciating by 3.1 per cent since November 8.

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