The Trump trade gets a second wind

published 24 February 2017

"Like the weather in Chicago, you don't have to wait long for a new trend in the stockmarkets," says Economist.com's Buttonwood blog. A few weeks ago, equity markets seemed to be reconsidering their initial enthusiasm for the new Trump administration. But in recent days the bulls have come back. The four main US stockmarket indices the S&P 500, the Dow Jones index, the tech-heavy Nasdaq Composite index and the small-cap benchmark Russell 2000 all closed at record highs for four successive days, a feat last achieved in 1995.

Trump appears to have kicked things off by promising a "phenomenal" tax plan, but this time the upswing has not just been a US story, as the FT points out. The MSCI All Country World index, tracking developed and emerging market equities, has also reached a new record peak. The recoveries in Europe and Japan "have apparently taken a firmer footing". US growth is expected to have reached an annualised 2.4% in the first quarter, up from 1.9% between October and December 2016. There are also signs of acceleration in emerging Asia.

Still, it's hard to escape the feeling that this Trump bump, like the first one, is too much, too soon. We still don't know how much of his stimulus programme he can get through Congress; markets seem to be counting on all of it and, for that matter, ignoring the threat of protectionism: Trump's "florid rhetoric on trade and immigration generally presages attempts to implement concrete and damaging policies", says the FT. What's more, optimistic global and US earnings estimates for 2017, and high valuations on Wall Street, will offer scant protection against stock price slides.

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Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.