Trading room at Zurich Life Investments Ireland
Onwards and Upwards
Ian Slattery examines the markets following a monumental US election and finds that equities rallied as bonds fell on the back of Trump election.
Investment markets were dominated by the election of Donald as the new President elect of the United States. The Trump Republican Party also maintained control of both the Senate and the US House of Representatives, as Trump defied pollsters who had predicted Hillary Clinton to win.
Recovering from an initial shock, equities finished the week as investors were buoyed by the prospect of increased strongly US government spending, tax cuts, and the potential for an easing of the regulatory burden for corporates.
In the developed world as sovereign bonds saw a sharp sell off, inflationary fears rose to the surface. Yields on 10-year US treasuries rose above 2% for the first time since January, and there is still the expectation of a rate hike by the Federal Reserve at its December meeting.
Emerging market equities and currencies also came under pressure last week, on the back of the expectation of more protectionist trade policies from a Trump administration.
The global index rose 4.3% last week in what was a volatile week of trading in the aftermath of the US election. Oil slipped 1.5% but remains up over 17% year-to-date. Gold fell heavily by nearly 6% during the week and closed at $1227/oz; silver followed suit and was down 5.7%. Copper rose strongly, returning 10.8%on the expectation of increased infrastructure spending in the US.
The 10-year US treasury yield closed at 2.15%, from 1.78% a week ago, on the back of the aforementioned fiscal stimulus expectations. The 10-year German equivalent also rose, and closed the week with a yield of 0.31%.
The euro weakened against the dollar and sterling, which added to returns for Irish investors with holdings in these jurisdictions.
The week ahead
Tuesday 15th November: Eurozone GDP growth for Q3 is expected to be confirmed at 0.3% (quarter-on-quarter) and 1.3% (year-on-year).
Wednesday 16th November: The UK unemployment rate is expected to tick up to 5%, from a reading of 4.9% in August.
Thursday 17th November: US inflation figures are released where the consensus is for a month-on-month rise of 0.4%, and a year-on-year rise of 1.5%