Market evaluates Trump’s first test: Fail, well kinda.


That’s at least what bond markets thought today. Ten years rallied whilst equities held steady post Trump’s comments. At risk is how the economic expansion could occur. What was interesting was Trump’s continued attack on General Motors and how he intended to apply a tax on companies that made products offshore to be sold into the USA. The net effects of this tax could be a strong US dollar and hurt for companies such as Walmart, General Motors, and basically retailers. Pharma were not immune as Trump also suggested changes to how the USA pays for its drugs.

As markets dissected what Trump had to say, the dollar slipped and oil rose back to $53. That rise could be attributed to the Sauds looking to reduce sales to China (Bloomberg). The Saudi’s curbed sales to two Asian refiners by about 30%. The Saudi’s also cut supplies to an Indian Refiner by 20%.

Markets and especially some Fund Managers including Norway’s DNB Asset Management Division. The Asset Manager is betting that Trump’s fiscal stimulus won’t happen. The Manager is betting that bonds could rise a little further but then become value. The Manager is avoiding high beta socks and is weighted towards energy, banking and consumer stocks and investments are predominantly in Europe.

To date the Markets are looking for details and these details relating to policies are still very scant.

On a lighter note there is a suggestion that markets could start trading a Tweet index. The index would be based on the number of tweets made by Trump and the impact he has on named companies. For example Trump continued his attack on GM and GM was weaker on the day.

Aussie Market Today.

Markets are currently in a thin and uncertain environment. With this in mind and given the rally in the US 10 years, I would expect that the Aussie 10 years to rally on the day. Equities were slightly stronger on the day. Demand for Iron Ore continues and I expect this to translate to demand in equities especially resource stocks and Aussie Dollar to be stronger on the day.