Yahoo Finance 'Trumponomics' to give markets a fiscal boost
There is no doubt “Trumponomics” will remain an important factor influencing the markets.
Mark Burgess, CIO EMEA and global head of equities at Columbia Threadneedle Investments shares why he believes President Donald Trump is good for corporate profits.
“Markets are expecting a fiscal boost from the new President, which will drive an increase in corporate profitability and earnings – a positive for equity markets, all other things being equal. That is likely to lead to a tightening in interest rates given where we are in the employment cycle,” says Burgess.
[graphiq id=”878Vf9LOO7H” title=”Major U.S. Market Indices – Since the Election” width=”600″ height=”516″ url=”https://w.graphiq.com/w/878Vf9LOO7H” link=”http://market-indices.findthecompany.com” link_text=”FindTheCompany | Graphiq” ]
Expect rising bond yields
Is now the time to worry about rising bond yields?
Burgess explains the consequent rise in bond yields would normally act as some sort of brake on the economy, but because of global quantitative easing it is likely there will be an international bid for yield that will keep a lid on the Treasury market.
“So while corporate profits are picking up, bond yields are unlikely to back up because global investors simply won’t let them,” says Burgess.
European elections
As we get closer to the European elections we need to consider how the political events will shine a spotlight on the tensions.
Burgess says the markets are highly complacent, despite the strong presence of far-right parties in Holland and France. He adds, “Should we get a surprise in either country, we can expect a spike in volatility for risk assets due to the uncertainty of what will follow.”
Is QE in Europe no longer working?
According to Burgess the European economy looks reasonably healthy, but there is a growing acceptance that monetary policy and QE specifically in Europe is no longer working.
He explains, “Despite growth in Europe in 2016 being stronger than in the US. It is likely that higher growth and inflation will make the central bank think it can take its foot off the accelerator, and QE tapering will be critically important as we move through 2017 and into 2018.”
It seems the potential impact of President Trump’s policies will be occupying our thoughts for a long time.
Written by London-based journalist Tanzeel Akhtar. Her work has been published in the Wall Street Journal, FT Alphaville, CNBC, Citywire, Euromoney, Interactive Investor.
Disclaimer: The content on this page does not constitute financial advice and is provided for general information purposes only. Nothing on this page should be regarded as an offer to conduct investment business or to buy/sell any investment.
