October 27, 2017

Equinox and autumnal peak on stock markets

Management comment

At the equinoxes, the sun rises in the East and sets in the West. For the markets, the sun rose in the East in Asia heralding three major events. Xi Jinping was re-elected, confirming his hold over the Communist Party at its nineteenth congress. He confirmed his resolution to extend the influence of Chinese model throughout the world by implementing the reforms required to improve the quality of economic growth and reduce the harmful effects of pollution and poverty.
Meanwhile in Japan, the land of the rising sun, Shinzo Abe also secured his hold on power at the snap legislative elections, which should enable him to pursue his economic programme and drag Japan out of its lengthy period of lethargic deflation. Lastly, India, after introducing a generalised ID card, followed by demonetisation and VAT harmonisation, announced plans to recapitalise the public banks to the tune of USD 32 billion, in order to stimulate new loans. These three countries therefore continued to lead the way in adopting the reforms required to consolidate their economic growth. The sun also rose over Frankfurt with the latest comments from Mario Draghi at the ECB meeting on 26 October. He mapped out the monetary path until 2019 by extending the asset purchase programme for nine months and reducing monthly purchase amounts to EUR 30 billion, while also postponing a cut in base rates until 2019.

Investors were nonetheless heartened by his comments and piled into European equities. Lastly, the sun did not set in the West however. In the US, leading tech stocks (Alphabet, Amazon, Microsoft and Twitter) all published figures which astounded analysts. Against a backdrop of the US fiscal code reform possibly being adopted (the Republicans are in favour), investors continued buying into US equities, which saw positive inflow of USD 6.1 billion on the week.

For the time being, all indicators appear to be implying that the sun will not be setting in the immediate future on the financial markets, although they are close to their zenith. 

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in October 27th, 2017.

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At the equinoxes, the sun rises in the East and sets in the West. For the markets, the sun rose in the East in Asia heralding three major events. Xi Jinping was re-elected, confirming his hold over the Communist Party at its nineteenth congress. He confirmed his resolution to extend the influence of Chinese model throughout the world by...
2017-10-27