Market Report - November 14, 2016
Written on the 14 November 2016
Market Report with Paul Wareing from Barclay Wells Ltd
Well, I think it would be fair to say that the markets called the US election wrong on two fronts. Firstly , believing that a Trump win was barely plausible and secondly if it did happen the markets would go into free fall. Neither eventuated and the Dow Jones went on to record highs!
It seems that now the dust has settled, markets are particularly excited about fiscal stimulus through tax cuts and increased spending on defence and infrastructure . This is helping construction and defence related stocks while Trumps' other economic policy, reduced regulation, is also bullish for financial and health care stocks. Despite this feel good factor I still feel that US equities overall remain challenged by still-high valuations and sluggish corporate earnings. There's still almost ten weeks until Trump moves into the White House so I'm sure there'll be many more sound bites from the Donald, and who knows maybe even a policy or two?
In local markets last week, the S&P/ASX 200 was up nicely and Trump's victory, along with China's high PPI result, also provided another excuse for iron ore prices to rally further! We have a speech from the RBA Governor on Tuesday and unemployment numbers on Thursday but I think it unlikely that anything will change the outlook for interest rates, with attention focused on the US and Trump.
At present investors are moving away from local defensive yield plays (like listed property) in light of higher bonds yields and switching their attention to the financials for those still seeking yield. Resources are naturally still strong in light of the proposed infrastructure investment but I get the feeling that the market has latched onto the infrastructure theme as it wants to believe in something after so much uncertainty. So, i still anticipate volatility and look to the US to see how things will play out .
Have a great week !!
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