November 03, 2017

Markets still fueled by the economical cycle and central bank’s policies

Management comment

As the one-year anniversary of Donald Trump’s election approaches, the “Trump trade” has ultimately worked relatively well.

Since November 2016, global market cap has increased by USD 26,000 billion. Unexpectedly, bond markets have also continued making progress, although to a lesser extent (+ USD 2,000 bn). Investors have expressed an unfailing sense of optimism, focusing on the health of the economic cycle rather than on the tweets published by the US president. Highly bullish signals from the tech sector, typified by record Iphone X orders, and the prospect of an agreement over the tax code reform are also underpinning hope of further upside in the US markets.

With risk-free and risky asset prices at all-time highs, investors are nonetheless at the mercy of a shift or an error in monetary policy management. The recent nomination of Jerome Powell to succeed Janet Yellen should generally be perceived as a guarantee of continuity, although the forthcoming renewal of several board members may give rise to some incertitude.

In the eurozone, Mario Draghi’s speech has prompted almost blind confidence in the ECB’s capacity to support the economy. In short, both the Fed and ECB are sheltering the markets against any financial catastrophes. However, these two major central banks alone cannot correct the inequalities that the cyber-capitalist model is creating.

In the US, the proportion of assets owned by the richest 0.1% is now equal to the proportion of assets held by the poorest 90%...a situation which has not been seen since the 1930s.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in November 3rd, 2017.

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As the one-year anniversary of Donald Trump’s election approaches, the “Trump trade” has ultimately worked relatively well. Since November 2016, global market cap has increased by USD 26,000 billion. Unexpectedly, bond markets have also continued making progress, although to a lesser extent (+ USD 2,000 bn). Investors have expressed an unfailing...
2017-11-03